Momentum builds on steeper minimum wage hike

By Kim Kyung-ho

Representatives from labor, management and the public sector last week undertook negotiations on setting the mandatory minimum wage to be applied at workplaces across the country next year.
Korea’s minimum wage has increased at a rapid pace in recent years, in particular under President Park Geun-hye’s administration, which has tried to bolster wage earners’ income as part of efforts to reinvigorate the economy by boosting domestic consumption.
After 12 rounds of talks over four months last year, the tripartite panel set the minimum wage for 2016 at 6,030 won ($5.23) per hour, an 8.1 percent rise from a year earlier. The increase rate was the highest since 2008 when the wage climbed by 8.3 percent to 3,770 won.
Corporate representatives boycotted the final session of the Minimum Wage Council last year, in which labor delegates agreed on the compromise put forward by government-appointed negotiators from the public sector.
Negotiations are expected to be as tough this year, with labor representatives calling for minimum wage to be raised to 10,000 won per hour and management representatives suggesting it should be frozen at the current level.
The atmosphere seems more favorable toward demands from the labor side.
A growing number of countries around the world are moving to raise minimum wages in efforts to spur domestic spending and reduce widening income inequality.
The state of California has recently decided to raise its minimum wage from the current $10 per hour to $15 by 2022, while U.S. Democratic presidential candidates Hillary Clinton and Bernie Sanders promised to increase the federal minimum wage if elected.
Britain this month put into practice its living wage system, under which its hourly minimum wage is supposed to rise from 7.2 pounds this year to 9 pounds by 2020. Russia is scheduled to raise its minimum wage by 20 percent in July, while Japan is pushing to increase its minimum wage by 3 percent annually over the coming years to 1,000 yen per hour.
Political parties here have also helped strengthen the labor stance by making pledges to raise minimum wage in their campaigns for the general election.
The ruling Saenuri Party said last week it would push for a hike to 9,000 won by 2020 when the term of the next parliament expires, though it later retreated from giving a specific number.
The main opposition Minjoo Party of Korea and other splinter parties have vowed to raise the wage to 10,000 won by 2019 or 2020.
International comparison shows Korea’s minimum wage remains below that of most other advanced countries.
According to data from the Organization for Economic Cooperation and Development, Korea’s dollar-denominated minimum wage was $5.09 in 2015, with the corresponding figures standing at $6.54 for Japan, $7.25 for the U.S., $9.84 for the U.K., $10.72 for France and $11.1 for New Zealand.
The ratio of its minimum wage to average wage remained at 35.2 percent in 2013, compared with 50.7 percent for New Zealand, 49.6 percent for France, 38.8 percent for the U.K., 33.9 percent for Japan and 26.8 percent for the U.S.
“Taking into account bonuses and other work-related benefits, Korea’s actual minimum wage is far from low,” said Kim Dong-wook, an official at the Korea Employers Federation. “The wage should be decided on in consideration of difficult conditions faced by small and medium-sized enterprises and self-employed people.”
It may be practically impossible to reach agreement on a proper level that can both ensure the stable livelihoods of workers and avoid cuts in employment.
Experts note that debate over minimum wage should not be preoccupied with numerical targets but should also pay heed to the actual effect of its increase on the earnings of the low-income group and the employment of low-skilled workers.
Government figures show that a sharp rise in minimum wage has led to an increase in failures to keep to it. The proportion of employees paid less than the minimum wage, which dropped to 9.6 percent in 2012, rose back to 14.7 percent last year, the highest among OECD member states. These figures show the need to strengthen measures to reduce the number of underpaid workers.
Kim Dae-il, professor of economics at Seoul National University, estimated that a 1 percent rise in the minimum wage could result in a 6.6 percent decrease in the new recruitment of the lowest 5 percent of wage earners.
Experts also say that increasing the minimum wage may not necessarily be effective in reducing poverty as many households that live below the poverty line have no members earning wages.

(khkim@heraldcorp.com)