South Korea’s Minimum Hourly Wages Increase
The South Korean Ministry of Employment and Labor has raised the hourly minimum wage to 7,530 won ($6.64) for 2018, a spike from the current wage of 6,470 won per hour. This move is a significant step towards actualizing President Moon Jae-in’s goal of an hourly minimum wage of 10,000 won by 2020.
The 16.4% hike is the steepest in the last 17 years and is projected to benefit 4.63 million workers, 23% of South Korea’s total workforce.
Approval for the minimum wage raise came after a 15-12 vote in favor by a trilateral council comprised of representatives from labor, management, and the general public.
Rationale Behind the Decision
The South Korean government has explained its commitment to an integrated economic growth that protects the interests of workers without affecting businesses. The raised minimum wage is expected to narrow the income gap and foster an inclusive or “income-led” growth. In 2018, a minimum-wage employee working eight hours a day will receive 60,240 won per day, 1.57 million won a month.
This rise in minimum wage will increase household earnings; the government anticipates increased domestic consumption, greater business profits, and the creation of more jobs.
Complaints from Small and Medium Enterprise (SMEs)
SMEs and corporate associations have objected, expressing concern that this drastic hike will lead to higher labor cost. The Korea Employers Federation claims the decision will deteriorate business conditions in general and will take a particularly heavy toll on small businesses.
The government was prompt to pacify the opposition; acknowledging that the decision may place a financial burden on businesses, the Finance Ministry of Korea has established a fund worth 4 trillion won ($3.5 billion) for supporting SMEs. Vice Finance Minister Ko Hyoung-kwon also announced plans to reduce credit card company commission fees and value-added taxes to negate undesirable effects for SMEs. The overall support to SMEs will increase by 7.4%.
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