Tensions are brewing between the labor and management factions over what the country’s minimum wage should be next year, when President Moon Jae-in’s five-year tenure comes to an end.
Employment and Labor Minister Lee Jae-kap asked the Minimum Wage Commission on Wednesday to undertake the process of deliberations to set the wage floor for 2022. The commission will soon convene the first meeting of its 27 members, with nine members each representing labor, business and the wider public. Under the law, the minimum wage for next year must be decided by Aug. 5.
During his election campaign in 2017, Moon pledged to push for a steep minimum wage hike as one of the pillars of his income-led growth policy. Specifically, he vowed to raise the wage floor to 10,000 won ($8.86) per hour by 2020.
The hourly minimum wage increased 16.4 percent on-year to 7,530 won in 2018, the sharpest rise in 17 years, followed by a 10.9 percent hike to 8,350 won in 2019.
The increase rate slowed to 2.9 percent in 2020, when the wage floor was set at 8,590 won amid mounting calls to adjust the pace of wage growth to cushion the fallout from previous steep hikes. At that time, Moon came forward to apologize for failing to keep his election promise.
The coronavirus outbreak, which dampened economic activity and worsened unemployment, further decelerated the increase to 1.5 percent last year, when the minimum wage was pegged at 8,720 won. The smallest-ever increase, which came on top of a 33 percent hike over the previous three years, has still been burdensome for many marginalized employers, particularly mom and pop business owners.
The continuous wage increase, coupled with other pro-labor measures taken by the Moon government, has driven mostly low-wage workers out of their jobs as employers have cut their payrolls to cope with rising personnel expenditures. Subsidies offered by the government to offset increased wage costs have done little to prevent low-skilled temporary and part-time workers from losing their jobs.
The prolonged pandemic crisis has exacerbated the country’s unemployment problem.
The number of employed people in the country fell by 982,000 from a year earlier to 25.8 million in January, marking the steepest on-year decline since December 1998, according to data from Statistics Korea. A record high of 1.57 million people remained jobless that month.
The job data showed some improvement in February, mainly due to the resumption of government-funded job programs. But employment figures will deteriorate again when those programs are terminated.
A recent survey by a local recruitment agency in March showed that the number of job openings at companies had nearly halved from three years earlier.
Under these circumstances, it is a more reasonable choice to minimize the minimum wage increase. At a time when economic uncertainties are greater than ever, the focus should be on retaining jobs rather than squabbling over wage hikes.
The business community hopes to cut or at least freeze the minimum wage next year, noting that most employers could hardly endure an additional hike.
Whereas labor groups are calling for a significant rise, stressing the importance of ensuring stable livelihoods for the low-paid workers who are suffering most from the economic shock of the coronavirus pandemic. They particularly demand that actual living costs be taken into account in setting the wage floor. By their calculations, the minimum wage should be raised by more than 23 percent from the current level to 10,765 won per hour.
With the positions of labor and management remaining far apart, members selected by the government to represent the wider public are expected to hold the key to deciding the minimum wage for next year as in previous years. It may be necessary for the government to guide them to minimize the increase.
In the long term, the administration should push for legislation to change the process of deciding the wage floor. The formation of a separate panel consisting of independent experts, tasked with suggesting upper and lower limits for the minimum wage, could help set it at a more reasonable level.
Consideration should also be paid to growing calls from the business community for the differentiated application of minimum wage regulations by industry, region and corporate size. Since the minimum wage was introduced in 1988, a single rule has been applied to all workplaces across the country.