The Korea Herald


[Editorial] Minimum wage

A sharp hike would result in job losses

By 백희연

Published : April 5, 2016 - 17:13

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The Minimum Wage Council will kick off negotiations Thursday to set the national minimum wage for next year. Discussions among the labor, management and government representatives are expected to be unusually stormy this year, as labor groups are determined to raise the wage floor drastically.

Last year, the trilateral council set the minimum wage for 2016 at 6,030 won (about $5.30) per hour, up 8.1 percent from that for 2015. The increase rate was the highest since the 8.3 percent hike in 2008.

Yet the new minimum wage was far from satisfactory for the labor circles. At that rate, a full-time worker could make a mere 1.26 million won a month based on a 40-hour workweek, way below the poverty line for a single person, which was 1.55 million won in 2014.

Labor groups have already presented their demands, deviating from the usual practice of disclosing their proposals in late May or early June. The early disclosure appears to be aimed at making minimum wage a hot issue in the run-up to the April 13 general election.

The Korean Confederation of Trade Unions, the more militant of Korea’s two umbrella labor groups, demands that the minimum wage be raised to 10,000 won per hour or 2.09 million won per month.

The KCTU argues that the minimum wage should be raised to a level that enables workers to feed their families, as many of them are bread earners for two- to three-member families.

Political parties have responded to labor groups’ call for a sharp increase in the national minimum. The main opposition Minjoo Party of Korea promised to raise it to 10,000 won per hour by 2020. Fulfilling the party’s pledge requires increasing the base wage by 13.5 percent annually for four consecutive years.

The ruling Saenuri Party also sought to cater to workers by offering to raise the minimum wage to a maximum of 9,000 won by 2020.

The push for a sharply higher minimum wage by labor groups and political parties appears to be influenced by a recent rush in advanced countries to raise minimum wages.

On Friday, Britain hiked its minimum wage for workers aged 25 or older to 7.20 pounds ($10.36) an hour from 6.70 pounds. The wage floor will be raised each year until it reaches 9 pounds by 2020.

In the United States, California and New York, two of the four most populous states, have recently decided to boost the minimum wage to $15 per hour by 2022, more than double the present federal minimum wage of $7.25. 

In Japan, Prime Minister Shinzo Abe has called for a 3 percent increase in the minimum wage each year so that it could reach 1,000 yen by 2020.

Korean labor groups argue that a substantial increase in the minimum wage will not only reduce poverty among the working poor but give a much-needed boost to economic growth by expanding private consumption.

But they ignore the flip side. A steep hike in the minimum wage could result in job losses for some workers, as small businesses would have to cut their payrolls to reduce costs. In Korea, the proportion of workers vulnerable to such cuts is high. 

Korea’s minimum wage level is not high compared to other members in the Organization for Economic Cooperation and Development. But it needs to be raised in a way that does not put too much of a financial burden on companies.