Talks between labor and business next year’s minimum wage stalled

Ryu Gi-jeong, director-general of the Korea Enterprises Federation (left), and Ryu Ki-seop, secretary general of the Federation of Korean Trade Unions, are present at the tenth plenary session at Sejong Government Complex on July 4. [Photo by Yonhap]

A deadlock over next year’s minimum wage between labor and business representatives has remained in South Korea.

The Minimum Wage Council under the Ministry of Employment and Labor on Tuesday convened the tenth plenary session at Sejong Government Complex to set the increase in the legal hourly wage for employees next year.

During the previous meeting, Minimum Wage Commission Chairman Park Joon shik requested labor and business representatives to submit amendments to their proposed hourly wages, but the two sides reiterated their drafts without any changes. The Council failed to reach an agreement by the deadline of June 29.

The representatives on behalf of employers argued that a rise on the minimum wage would not improve income distribution, citing a downward revision in the country‘s economic growth forecast for the second half of this year, released on that day.

“South Korea’s economic growth forecast by the government was 1.4 percent, the lowest ever since 1960,” said Ryu Gi-jeong, director-general of the Korea Enterprises Federation. “A high minimum wage increase will pose an enormous threat to self-employed and small-to-medium sized businesses (SME) altogether, which ends up hurting the livelihoods of vulnerable employees who make ends meet.”

“A hike in the minimum wage will add more strains on business activity in SMEs, thus affecting employment,” said Lee Myeong-ro, head of the Manpower Policy Division of the Korea Federation of SMEs.

In response to the opposition to a minimum wage hike, the labor representatives pointed to high inflation and fewer labor unions as the reason for the rise. “The previous rises in the minimum wage didn’t reflect inflation as the government’s estimates have been lower than the actual inflation by 0.7 percentage points last year and 0.6 percentage points this year, which led to lower rates of increase,” said Ryu Ki-seop, secretary general of the Federation of Korean Trade Unions.

They also called the Council for an official response to a media report that quoted an unnamed official from the government who said the minimum wage would be set within the range of 9,800 won ($7.56) per hour. “That could serve as a sort of guideline,” said Ryu.

The public sector panel of the Council refuted the suspicion. “The members of the public-sector panel are committed to facilitating a smooth agreement between the two sides while avoiding active intervention as an unbiased arbitrator in the negotiation,” said Kwon Soon-won, a panel member and professor at Sookmyung Women‘s University.

The stalled negotiation has raised a chance that a minimum hourly wage will be set by the public-sector panel. The Council will set the wage for the next year based on a final arbitration from the panel if the labor and business representatives fail to reach a consensus.