Korea Inc. advised to refrain from wage hikes: Korean employer group chief

[Photo by Han Joo-hyung]

Companies should slow wage increases at a time when the economy is bracing for recession from untamed inflation, South Korea’s major business lobby group head urged, while noting that Asia’s fourth largest economy has still work hard for labor reforms.

“Large corporations should also reflect on themselves. As a result of their excessive wage increases in the war for talent, there is a widening gap between minimum-wage and high-income workers, causing a social conflict,” Sohn Kyung-shik, Chairman of Korea Enterprises Federation (KEF), a major business lobby group, said during a recent interview with Maeil Business Newspaper.

Sohn also recommended the country refrains from another hike in the minimum wage for next year, which should add to woes of small business owners during the economic downturn.

But the fundamental issue in Korea’s pay system lies in the current seniority-based payment system, he argued. It is necessary to change the pay system, and KEF will continue to be in close consultation with government officials and politicians to make an immediate shift to a merit-based payment system as a fundamental solution.

Sohn welcomed the government’s move to give companies more flexibility in applying the current 52-hour workweek rule.

The new administration led by President Yoon Suk-yeol that took office in May is seeking to give companies more flexibility in applying the country’s strict 52-hour workweek (12-hour overtime plus the maximum 40 hours of work per week) by condoning overtime beyond 12 hours in a certain week when maximum overtime does not exceed 48 hours per month. Businesses have complained of difficulties in meeting production deadlines due to the draconian workweek system introduced in 2018.

But “Korea has still a long way to go with labor reforms,” Sohn said. “Establishing legal order in industrial disputes, shifting to a merit-based payment, and guaranteeing the defense right of management against workers’ union during labor disputes are among the reforms that the government should strive to achieve.”

[ㄏ Maeil Business Newspaper & mk.co.kr, All rights reserved]