[Editorial] Seek a new option

Government needs to consider a new approach to the minimum wage system

A tripartite commission representing labor, business and the general public finally set the hourly minimum wage for next year at 9,860 won ($7.8) Wednesday, up 2.5 percent from this year. It is equivalent to a monthly wage of nearly 2.07 million won.

The process for determining the minimum wage is always a painful process, but this year proved to be extremely tough. From the outset, representatives from labor and the general public clashed with each other, resulting in the cancellation of the first meeting. Last month, a labor member was removed from the commission over a different issue, shaking the proceedings already fraught with a series of disturbances and face-offs.

Since the labor minister made his official request for a minimum wage review on March 31, the members fiercely fought over the decision, protracting the procedure beyond the legal deliberation limit set for June 29.

Eventually it took the longest-ever 110 days before the tripartite commission reached a decision Wednesday. The previous record was in 2016, when the commission took 108 days.

At the heart of the dispute was a wide gap in the hourly wage between labor and business. Citing rising inflation, the labor side had initially proposed 12,210 won as the 2024 minimum wage, up 26.9 percent from this year's 9,620 won. The business side demanded a freeze, arguing the minimum wage had gone up too much in recent years.

The attention was initially focused on whether the hourly minimum wage would break the 10,000-won mark this year for the first time, a key issue for both labor and business sides as the impact would be not only symbolic but also substantial in the real economy.

The two sides narrowed the gap in the following negotiations, but failed to reach an agreement. As a result, the commission held a vote between 10,000 won and 9,860 won -- the proposed targets from labor and business, respectively -- and the business side’s suggestion was adopted.

Following the decision, the labor side immediately protested that the 2.5 percent increase was an effective decrease in real wages for workers, considering the projected inflation of 3.5 percent for this year.

The business side seems to be relieved about the final decision, but small business operators who hire part-time workers are expected to confront difficulties in management and operations as the hourly minimum wage has already jumped 52.4 percent over the past seven years.

The Korea Federation of Micro Enterprises (KFME), which represents owners of small and medium-sized businesses, criticized the increase.

“The decision (for the 2024 minimum wage) is irresponsible since it entirely ignores the voices of small businesses,” said the KFME, which called for a freeze.

South Korea adopted the minimum wage system in 1988. The structure of the tripartite commission is designed to prevent conflicts over the minimum wage decision, but critics claim the current commission is stoking deep-rooted conflicts between labor and business, rather than offering a negotiation-based compromise.

Another critical issue is the application of the minimum wage to all sectors and regions under the current system. Some experts say that as business conditions and employment situations vary greatly by region or sector, industry- and region-specific applications are in order.

Given the problems facing both businesses and job seekers, the government needs to reassess and overhaul the operation and decision-making process of the minimum wage. In today's vastly specialized industries, the existing approach tends to squander administrative efforts and falls short of achieving the goal of protecting low-wage workers.

It is time to explore a differentiated minimum wage based on industries and regions, alongside enacting reasonable wage calculation criteria. Striking a balance between safeguarding the rights of low-wage workers and promoting business competitiveness is no easy task. But failure to do so could have far-reaching consequences for the nation’s workers, businesses and the overall economic growth.

By Korea Herald(khnews@heraldcorp.com)