Minimun wage for 2025 exceeds 10,000 won threshold for first time
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Lee Myung-ro, head of the small business labor policy division at the Korea Federation of SMEs and a representative of the management side on the Minimum Wage Commission, said, "More struggling companies will attempt to reduce hired staff and replace them with kiosks or other alternatives."
The FKTU said, "Although some media portray surpassing 10,000 won as a major achievement, a 1.7 percent increase is the second-lowest in history and effectively a reduction in real wages. We apologize to low-wage workers who are likely disappointed with this outcome."
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The minimum wage for 2025 has been set at 10,030 won ($7.30) per hour, surpassing the 10,000 won mark for the first time since the system was introduced in 1988 and eliciting mixed reactions from business owners and employees.
This decision, reached during the Minimum Wage Commission’s 11th plenary meeting Friday, represents a 1.7 percent increase from the current 9,860 won per hour.
The new rate translates to a monthly wage of approximately 2.1 million won, based on a standard 40-hour workweek.
Surpassing the 10,000 won threshold occurred 37 years after the minimum wage was introduced and 11 years after it surpassed 5,000 won in 2014. However, the increase rate of 1.7 percent is the second-lowest in history, just above the 1.5 percent increase in 2021.
The decision was reached at 2:30 a.m. on Friday after a marathon negotiation session that began at 3 p.m. the previous day.
Labor and management representatives from the Minimum Wage Commission, which includes members representing the public interest, put forward successive revised proposals. Labor’s demands started at 12,600 won, a 27.8 percent increase, and were revised downwards. Management's proposals were minor adjustments, starting from a freeze at 9,860 won.
Reactions to the modest increase are mixed among labor groups, while voices of concern emerge from the business side. Small business owners and self-employed individuals, already struggling, fear exacerbated financial difficulties.
Lee Myung-ro, head of the small business labor policy division at the Korea Federation of SMEs and a representative of the management side on the Minimum Wage Commission, said, "More struggling companies will attempt to reduce hired staff and replace them with kiosks or other alternatives."
According to a recent research report released by the Pi-Touch Institute, a 1 percent increase in the minimum wage results in a 0.77 percent increase in the closure rate of businesses with 1-4 employees.
Ryu Ki-jung, a representative from the Korea Enterprises Federation, a business lobby representing over 4,000 businesses in the country, also argued for a wage freeze.
"Over the past five years, the minimum wage has increased by 27.8 percent, while labor productivity growth has only been 4.5 percent," Ryu said.
On the other hand, labor groups argue that a significant increase is necessary due to rising inflation. They have advocated for a minimum wage of 10,000 won since 2015, expressing disappointment with the decision.
Both the Federation of Korean Trade Unions and the Korean Confederation of Trade Unions, two major umbrella unions, issued critical statements Friday.
The FKTU said, "Although some media portray surpassing 10,000 won as a major achievement, a 1.7 percent increase is the second-lowest in history and effectively a reduction in real wages. We apologize to low-wage workers who are likely disappointed with this outcome."
The KCTU stated, "It has been 10 years since labor groups first demanded a 10,000 won minimum wage. In that time, inflation has soared, and real wages have declined. In the past two years, the minimum wage has increased less than the rate of inflation, leading to further declines in real wages."
People who rely on part-time jobs also argue that the minimum wage has risen too slowly. They cite inflation as the basis for their argument.
A 28-year-old woman living in Seoul, surnamed Han, who balances part-time work with job preparation, said, "It's problematic that it's difficult to afford even a 12,000 won dish of pasta with an hour's work at the current minimum wage. It should at least allow us to buy a decent meal."
The Ministry of Employment and Labor estimates that the 2025 minimum wage would impact approximately 3 million workers. Following the commission's decision, the Ministry will formally announce the new minimum wage by August 5, with it taking effect January 1, 2025.
Labor and management groups can file formal objections to the new minimum wage. If the Ministry deems these objections valid, it can request a reconsideration, though historically, no such reconsideration has occurred.
By Lee Jaeeun(jenn@heraldcorp.com)
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