[Editorial] Minimum wage debate

Tripartite commission must seek a deal that is sustainable for workers and employers

The official review process to set the 2025 minimum wage started Tuesday, heralding a heated debate among the members of the tripartite commission due to conflicting views about how much minimum wage should be raised.

This year, there are two primary issues: whether next year’s minimum wage per hour will exceed the threshold of 10,000 won ($7.34) for the first time and whether the differentiated application of minimum wages will be allowed, depending on the situations of industries.

The outlook for a quick and smooth conclusion about the two controversial issues remains cloudy, as the 27-member Minimum Wage Commission, with nine representatives each from labor, management and the public, holds conflicting opinions.

During the inaugural meeting in Sejong, representatives from the labor sector claimed that workers, especially those who receive low wages, have suffered greatly because of the small increase in the minimum wage in the past two years.

Last year, South Korea raised the minimum hourly wage for 2024 by 2.5 percent to 9,860 won. The minimum wage for 2023 was 9,620 won, up 5 percent from the previous year.

This year, if the commission manages to agree on a mere 1.42 percent increase, or 140 won, the minimum wage will hit the 10,000 won mark. Given that the country’s consumer prices rose 3.6 percent last year, workers appear to expect the per-hour wage to surpass 10,000 won and, if possible, go up a little more in consideration of soaring inflation.

The management side, however, claimed that many of those who run small enterprises face difficult situations, expressing dismay at a sizable increase in the minimum wage.

Considering the contrasting views, the commission should consider a variety of related factors such as consumer prices, economic trends and employment conditions. What’s important is finding an optimal level of minimum wage increase that reflects the purpose of the minimum wage system itself and allows both workers and employers mutual benefits.

Setting a minimum wage is a tricky task. Small companies and merchants will be forced to shut down or cut the number of employees if they are not able to afford a sharp increase in wages.

In fact, more than 3 million workers were paid less than the minimum wage last year, illustrating the dire situation for workers in various fields.

And 50.6 percent of self-employed people had to run their food and accommodation businesses without employees because they had no budget for labor. Hiring a new employee, even at minimum wage, could result in losses for such small business owners. This shows that a minimum wage that the market cannot support does not help anyone.

Against this backdrop, the commission is expected to explore the differentiated application of the minimum wage, seen by some as a way to address the side effects of the current minimum wage system that is now applied to all sectors regardless of region, industry or age.

The Minimum Wage Act allows for different minimum wages to be set for different types of businesses. However, with the exception of 1988, the first year of the minimum wage, the Minimum Wage Commission has consistently opted for a single universal minimum wage for all businesses.

In February, the Bank of Korea proposed that the country should consider applying a lower minimum wage for care workers of foreign nationality through contracts directly with private households in a bid to lessen the burden of rising care costs. The Seoul Metropolitan Government is also set to start a pilot program related to hiring foreign care workers in September, paying them the 2024 universal minimum wage.

The labor side strongly opposes the differentiated application of the minimum wage, suggesting fierce debate ahead. For all the difficulties resulting from conflicting positions, the tripartite commission must seek a deal that is sustainable for both workers and employers.

By Korea Herald(khnews@heraldcorp.com)