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Minimum wage set to rise 7.2 percent next year

July 5, 2013 - 09:24 By 김정보
Korea’s minimum hourly wage will rise 7.2 percent to 5,210 won ($4.57) next year, a three-party council of government, labor and business representatives said Friday.

Under the agreement, the minimum wage of laborers working 209 hours a month will be increased to 1.08 million won. About 2.56 million workers will benefit from the deal, it added.

“Diverse factors including economic growth rate, price inflation and wage increase rates of other income groups have been reflected in the 7.2 percent (wage) increase,” said Park Jun-seong, who chairs the council. “The wage increase also incorporates the (government’s) policy goal of reducing the labor income gap over the next five years,” he added.

The deal was reached in a 15-0 vote with nine abstentions at the end of a two-day marathon negotiation. The wage increase proposal requires a majority vote from the 27-member council, which consists of nine members each from the labor, business and a public interest group appointed by the government.

The proposal was put to a vote with only 24 representatives attending. Three labor representatives left the negotiation table before voting process even began. All nine members from the business side abstained in protest of the proposal, the council said.

The 7.2 percent proposal was pushed by the public interest group as labor and business failed to narrow differences.

When the negotiations began in April, labor unions demanded a 21.6 percent increase to 5,910 won per hour while the business called for a freeze. The current rate is 4,860 won.

Unions pointed out that Korea’s minimum wage was 37 percent of the average salary, far below the 50 percent recommended by the Organization of Economic Cooperation and Development.

“The proposal to raise (the minimum wage) by 7.2 percent is disappointing. The quality of life of laborers earning minimum wage would only be improved with at least a two-digit increase,” Lee Jae-woong from the Korean Confederation of Trade Union, a progressive labor group.

Businesses countered that for the past 13 years the minimum wage had increased at twice the rate of consumer price inflation. The proposed rate would also put bigger financial burden to small companies, they claimed.

“The 7.2 percent proposal would impose a (bigger) burden to small companies with fewer than 30 employees particularly in this worsening economic state,” said Kim Dong-wook, an official from the Korea Employers’ Federation, representing the business side. Kim abstained because he couldn’t agree with the proposal, he added.

The Ministry of Employment and Labor will soon announce details of the wage increase deal and apply the increase by Aug. 5, the panel said.

Labor and business are expected to lock horns over other contentious issues including an “ordinary wage” system and government plans to increase the number of part-time jobs.

By Cho Chung-un