South Korea’s minimum hourly wage for 2023 has been set at 9,620 won ($7.41), a 5 percent increase from this year. The new rate translates to a monthly wage of 2.02 million won, surpassing the 2 million won mark for the first time.

But neither the labor nor business side were satisfied with the outcome, posing a problem for the Yoon Suk-yeol administration, amid concerns about deepening economic woes including surging inflation.

Made up of 27 representatives -- nine each from labor, business and the general public -- the Minimum Wage Commission went through fierce debates before settling for the final figure due to the wide gap in proposed increases.

The labor side initially called for a 12.9 percent hike, which would raise the wage floor to 10,890 won per hour. It retreated to a 10 percent increase in a following session to seek a compromise. By contrast, the business side proposed a 1.1 percent increase from this year, or a minimum hourly wage of 9,160. It revised its proposed rate hike to 1.86 percent.

To seek a breakthrough, the general public side proposed 9,620 won, which was eventually passed by representatives only 10 minutes before the legal deadline for minimum wage deliberations, suggesting how hard the commission members wrangled over the rate.

Indeed, the country’s minimum wage is an important and highly sensitive topic as it is applied equally across all industries. Considering a slew of negative factors such as runaway inflation and increasingly unfavorable business conditions, it was extremely difficult to agree on an optimal figure.

The labor side’s key argument is that the minimum wage increase is too small for low wage workers. The business side counters that small- and medium-sized companies and small shop owners are already having difficulties in running their businesses in the face of higher cost.

In all fairness, both have valid points. Given that inflation is rising at a brisk pace in recent months, next year’s 5 percent increase might seem barely enough in the eyes of workers. But businesses may find the same 5 percent rate hike as too burdensome as they are in for more economic challenges in the coming months.

The commission’s chief Park Joon-shik said the 5 percent increase is based on data that forecasts economic growth of 2.7 percent and a 4.5 percent average inflation for this year.

Things could worsen further. Policymakers are worried that the country’s inflation could top 6 percent in June, after it jumped 5.4 percent on-year in May, the fastest rise in almost 14 years. As central banks across the world, led by the US Federal Reserve, are raising interest rates to tame inflation, a growing number of experts see higher risks of economic downturn, or a recession.

Faced with inflation, a higher interest rate and the decreasing value of the Korean currency against the US dollar, companies and consumers alike are expected to tighten their belts, which could lead to a decrease in sales of various products.

Against this backdrop, it is reasonable to think that too much increase of the minimum wage could make things worse, as firms will not employ workers at a loss. But policymakers should consider the reality that high inflation is eroding the real wages of low-paid workers when they weigh the impact of a minimum wage increase.

For all the different views, policymakers, labor and business should make joint efforts to minimize negative impact of the rate increase for next year, as it should not hurt the low-paid workers that the minimum wage policy is designed to help.