A rush to raise the minimum wage

The new government must require the differentiated rate system provision to be respected.

The Minimum Wage Commission after much dispute last week voted to set the minimum hourly wage for next year at 9,620 won ($7.4), up 5 percent from this year’s. The grounds for the raise were not explained or agreed to. The representatives from the militant Korean Confederation of Trade Unions (KCTU) walked out before the vote, leaving the members from the public sector and the Federation of Korean Trade Unions (FKTU), another umbrella union, to set the rate.

The groundless decision undermines the design and procedural justice of the minimum wage system. The Minimum Wage Act stipulates that the wage must consider the living cost of workers, comparative wages of workers of similar work, labor productivity, and income redistribution rate. Under the law, the minimum wage can be differentiated according to the work and industrial type. But that provision has long been ignored.

Since the law was enacted in 1988, the differentiation of the minimum wage base has never been discussed. Despite the need, it could not be tabled for review due to the opposition from the combative KCTU. As a result, the weakest in the labor market have been hurt. After small business owners laid off workers or closed their stores due to rapid hikes in the universal minimum wage, it in stead caused a shortage of part-time work.

Workers unable to receive the minimum wage reached 3.22 million last year, making up 15.3 percent of the total work force. The ratio was 40.2 percent among the hires in lodging and restaurant segment. Due to the disparity with the reality, the statutory hourly pay cannot be kept. The law to protect the weakest has ended up hardening their lives. Employers who do not pay at least minimum wage can face up to three years in prison. The penalty is also of no use after too many employers break the law.

The situation owes much to a steep increase in the minimum wage under the liberal Moon Jae-in administration. The wage rose 7.36 percent on average annually during the five years of the government which pledged to raise the minimum hourly wage to 10,000 won. The five-year economic growth under the last government averaged 2.28 percent, which was the slowest for any government. Small businesses and merchants have been hit hardest. Part-time work also has become short.

The Yoon Suk-yeol administration must make amends. The new government must require the differentiated rate system provision to be respected. It must not leave the matter entirely with the independent Minimum Wage Commission. The unilateral ways of the KCTU also must be addressed. The raise without any reasonable grounds is hurting both employers and employees.