Korea to rethink minimum wage

The Minimum Wage Commission meets on July 11. (Yonhap)

The South Korean government has embarked on a task to bring about a major overhaul of the nation’s minimum wage system, launching an in-depth study into how key economies determine their minimum wages, officials said Thursday.

The Ministry of Employment and Labor announced Thursday that it has recently commissioned a study titled "International Comparative Analysis of Minimum Wage Determination Systems." The move aims to address long-standing criticisms of South Korea’s minimum wage determination process by learning from international practices to refine and enhance the system.

In the request for proposals for the study, the Labor Ministry highlighted the necessity of this research, citing, "Each country exhibits unique socioeconomic backgrounds, leading to distinct paths of minimum wage system development and criteria for determination. However, there is a noticeable lack of detailed data in this regard. By investigating and analyzing minimum wage determination practices in key countries, we aim to gather insights that could inform and improve our system."

The research, set to be completed by the end of this year, will compare South Korea's minimum wage system with those of at least six other countries. The study aims to evaluate the strengths and weaknesses of each model, offering valuable perspectives that may be applied domestically, according to the ministry.

Since its introduction in 1988, South Korea's minimum wage has been determined by the 27-member Minimum Wage Deliberation Commission, comprising nine representatives each from labor unions, employers and the public interest. This annual mechanism has faced criticism for its contentious negotiations and reliance on voting rather than consensus. The process has also been criticized by some for lacking clear, objective evidence to support decision-making. The representatives of the public interest, appointed by the government, often cast the decisive votes, prompting concerns about their impartiality. Additionally, the commission frequently makes decisions hastily at or even past the deadline, leading to further dissatisfaction with the process.

Due to these recurring issues, the Ministry of Employment and Labor announced immediately after concluding the deliberations for the 2025 minimum wage in July that it would start discussions on improving the minimum wage system and its operational methods.

Labor Minister Lee Jung-sik emphasized the need for reform, stating on his Facebook page on Monday, "It is time for the minimum wage system, which has served us for 37 years, to undergo a renewal." Korea's Minimum Wage Act was established in 1986, with the Minimum Wage Deliberation Commission set up the following year.

He elaborated, "This month, we will form discussion groups including field experts and stakeholders to thoroughly review the various issues that have been raised. We will also meticulously examine international cases while listening to diverse voices from the workplaces. Our goal is to develop a minimum wage determination system that resonates with the public.”

Meanwhile, 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 ever. The decision, reached during the Minimum Wage Commission’s 11th plenary meeting held on July 12, represents a 1.7 percent increase from the current 9,860 won per hour.

By Lee Jaeeun(jenn@heraldcorp.com)