S. Korea's minimum wage proposed to rise 5% to $7.4 next year

[Photo by Yonhap]

South Korea’s minimum hourly wage for next year has been proposed to go up by 5 percent – similar to this year’s gain - to 9,620 won ($7.39), a decision that has upset employers and employees both facing a tougher year with inflation gaining to the levels last seen in crisis-stricken 1998.

According to the Minimum Wage Council, the social dialogue body for review and decision on minimum wage in Korea, on Wednesday voted to set the minimum hourly wage for 2023 at 9,620 won versus this year’s 9,160 won. Based on 209 working hours, the monthly minimum pay should be 2,010,580 won.

The vote took place amid a wide gap between representatives of workers and employers. The public-sector representatives mediated with 9,620 won.

The vote was 12 in favor, one against, and 10 abstentions. Four worker-members opposing 9,620 won had absented themselves.

Minimum Wage Council consists of 27 members – nine for employees, nine for employers, and nine from the public sector.

A 5 percent rise is more or less similar to this year’s gain of 5.1 percent.

Under the early part of the five-year presidency of former president Moon Jae-in who vowed 10,000 won as minimum hourly pay as campaign platform, the minimum rate rose in double digits - 16.4 percent in 2018 and 10.9 percent in 2019. After a disastrous impact on jobs and small employers, the rise significantly slowed to 2.9 percent for 2020, 1.5 percent for 2021, and 5.1 percent for this year.

Bot employees and employers were disgruntled.

“A 5 percent raise does not even match the inflation rate, which would mean a cut in the real wage,” the employee group argued. The monthly inflation rose 5.4 percent in May and is expected to shoot above 6 percent during summer.

Employers claim they cannot afford 5 percent as many small businesses are on the brink of collapse due to high-interest rates and slow demand.

By law, the Minimum Wage Council’s decision requires endorsement from the labor minister to become formal through an announcement by Aug. 5. Once the announcement is made, the new minimum wage will take effect from Jan. 1, 2023.

Workers and employers may raise objections against the decision before the labor ministry makes the announcement. If the ministry finds the objection reasonable, it can send back the decision to the Minimum Wage Council for reconsideration. There has been no such case so far in Korea.

Minimum wage is the lowest wage that employers can legally pay their employees. It is also used as the base for determining the amount of various government aids, such as unemployment benefits.

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