Heated debate over a hike in the minimum wage for next year is expected in the coming months as the government looks to pressure businesses to accept wage raises as part of efforts to revive the economy, while labor groups have mixed reactions to the idea.
A core issue is whether the business sector will respond to the calls from the Finance Ministry to drastically increase the minimum wage to boost the economy by vitalizing consumption in the private sector.
The nation’s two largest labor groups also question the intention behind Deputy Prime Minister and Finance Minister Choi Kyung-hwan, who recently called for a rapid increase in the minimum wage.
Casting doubt on the proposal seemingly supported by conventionally business-friendly Cheong Wa Dae and the ruling Saenuri Party, the labor groups argue that the administration is trying to soothe workers as a “carrot and stick” approach before a revamp of an overall labor market structure.
Businesses, meanwhile, contested Choi’s calls, with the Korea Employers Federation citing global comparison data, which reportedly shows that the minimum wage level in South Korea is higher than in the United States and Japan, when considering gross national income.
When Korea’s GNI-adjusted minimum wage index is set at the benchmark 100, the U.S. wage level is far lower at 63.7, Japan with 71.6 and Australia with 91.6, though Korea lagged behind the developed countries in the salary’s absolute figure, the federation said.
KEF chief Bahk Byung-won warned that a drastic hike will undermine the financial status of small and mid-sized enterprises. He also cited the “worsening business environment.”
While the business sector is likely to demand a restricted hike of between 0 and less than 5 percent, the Finance Ministry is reportedly pushing for a hike of about 10 percent.
The 2014 minimum salary in Korea is 5,580 won per hour, up 7.2 percent from a year earlier. When an employee works eight hours a day, he or she is paid 1.16 million won a month and 13.99 million won a year.
Some labor groups demand a hike of 20 to 30 percent, reiterating that the current minimum wage does not even meet the minimum cost of living in the nation.
Employment and Labor Minister Lee Ki-kweon, meanwhile, supported the wage hike, saying Monday that the ministry would “reflect President Park Geun-hye’s instructions to narrow the income gap” between the haves and the have-nots in its fine-tuning of the hike level.
While the labor sector welcomed the minimum wage hike in theory, some also stressed that the policy should not eventually target the more flexible labor market in which businesses will be allowed to increase the ratio of temporary workers and have authority to dismiss them easily.
Moon Jae-in, chairman of the opposition New Politics Alliance for Democracy, argued that it was necessary to increase the minimum monthly income.
“The business sector should seriously review the situation that a four-family member household manages to live with a monthly income of just 1.1 million won,” he said.
According to the Employment-Labor Ministry, the Roh Moo-hyun administration raised the minimum wage by 13.1 percent between 2005 and 2006, the Lee Myung-bak administration by 2.75 percent between 2010 and 2011 and the Park Geun-hye administration by 7.2 percent between 2013 and 2014.
Meanwhile, Samsung Group downplayed speculation that its flagship Samsung Electronics had frozen workers’ pay, arguing that the freeze only applied to basic pay.
“Considering the hike in performance-based pay and various allowances, the real increase comes to 4.2 percent on average.”
The minimum wage for 2015 will be determined in early August.
