Pay Raises, Inflation, and the Endless Cycle of Dissatisfaction

New Year periods are a threshold in almost every country where economic expectations are recalibrated. In Turkey, however, this threshold has long been framed around pay raise debates. Minimum wage increases, civil servant salary hikes, unionized agreements, and white-collar raise rates lead different segments of society, exposed to the same inflation, to confront each other with vastly different expectations. The resulting picture is often familiar: if raises are low, dissatisfaction rises; if they are high, inflation is fueled once again through costs.

At this point, I think to myself: the problem is not just "how much of a raise is given," but the relationship between raises and the economy. When the link between income growth and price increases is severed, everyone feels like they are constantly on the losing side. Furthermore, this situation is not unique to Turkey in recent years.

The US and Europe: Confronting Unaccustomed Inflation

In the post-2021 period, the US and Europe faced inflation rates they had not seen in a long time. As consumer inflation in the US approached 9% in 2022, double-digit numbers were seen in some Eurozone countries. This created a psychological turning point, especially for Western economies. Because these societies were used to viewing inflation as an "exceptional" circumstance.

In this new environment, salary increases accelerated and trade unions sat at the table with more aggressive demands. However, the result was similar again: rising wages increased costs, costs were reflected in prices, and a wage-inflation spiral emerged. In other words, the cycle experienced in Turkey for years became a global phenomenon, albeit on different scales.

Right at this point, the example of Japan offers a striking contrast.

Japan: Working in an Inflation-Free Economy

Japan is an economy that has experienced low inflation for nearly 30 years and even occasional deflation. According to OECD and Bank of Japan data, the annual average inflation hovered between 0–1% between 1995 and 2020. Real wages, on the other hand, virtually stagnated.

At first glance, this sounds like "stability." However, this stability comes at a price. Consumption appetite is low, domestic demand is weak, and growth is limited. Despite this, what is interesting is that Japanese employees do not live with a mindset of constantly expecting a raise.

Where Does Motivation Come From in a Working Life Without Raises?

The issue that made me think the most here was this: If there is no inflation, there is no expectation of a raise. Employee motivation in Japan is shaped less by salary increases and more by job security, corporate belonging, and social stability.

Long-term employment, predictable living costs, and low price volatility make it easier for individuals to plan for the future. People can focus on the question "where will I be in the next 10 years" rather than "how will I get through this month." This may slow down economic growth; but it also significantly reduces the level of social stress.

Of course, the Japan model is not perfect. Low consumption, an aging population, and a constrained appetite for innovation carry serious risks. However, the concept of a working life without inflation offers an instructive example for countries overwhelmed by raise debates.

Lessons to Be Drawn for Turkey

It is neither possible nor desirable for Turkey to turn toward a long-term stagnant model like Japan's. However, there is one area where Japan is strong: price stability. In my opinion, it is not possible for raise debates in Turkey to sit on a healthy foundation before inflation drops.

The solution here is not one-off high raises, but predictability. In an environment where inflation is permanently brought down, income increases are supported by productivity, and price expectations are broken, raises cease to be a crisis topic. In this sense, the Japan model reminds us that what truly motivates people is not earning more every year, but being able to preserve the value of what they earn.

When economic stability is achieved in Turkey, raises will become a normal management tool rather than a source of dissatisfaction. Otherwise, even if the numbers change, the debate will never change.