Minimum wage in South Korea

Article 32 (1) of the Constitution of the Republic of Korea reads: Every citizen has the right to work. The country should make efforts to enhance the employment of its workers and ensure proper wages in social and economic ways, and implement the minimum wage system as provided under the law.[2]

South Korea has guaranteed its workers a minimum wage through the Minimum Wage Act.

Article 1 of the Minimum Wage Act(Objective) aims to ensure the minimum level of wages for workers so as to contribute to the sound development of the national economy by promoting the stabilization of their livelihood and the qualitative improvement of their workforce.[3]

The South Korean government enacted the Minimum Wage Act on December 31, 1986, and implemented the Minimum Wage System beginning on January 1, 1988.[7] However, in 1988, when the economy was booming, the minimum wage set by the government was less than 30 percent of that of actual workers.[8] The minimum annual wages announced by the Ministry of Employment and Labor are as follows, and include the main holiday allowance paid by working more than 15 hours a week(Article 55 of the Labor Standards Act).[9]

Since the Minimum Wage Act was enacted in 1986, the minimum wage has been steadily rising. However, there are endless discussions over minimum wage laws and minimum wage increases.

The following table summarizes the pros and cons of minimum wage.

In 2018, the minimum wage committee decided to raise the minimum wage in 2018 by 16.4% from the previous year to 7,530 won ($6.65 USD) an hour. This is the largest increase (1060 won) since 2001 (16.8 percent).[11]

The effectiveness and feasibility of minimum wage increases are greatly debated topics. Both conservative newspapers and liberal pundits across South Korea were quick to denounce the new minimum wage measures. The Chosun Ilbo reported on the day after the 2018 minimum wage increase was announced that SMEs and small business owners were opposed to raising the minimum wage. They said, "The minimum wage increase is a measure that does not take into account the imminent reality of small and medium sized companies suffering from sluggish sales."[12] The Dong-A Ilbo also criticized the government's minimum wage increase on the same day, reporting on the criticism of the Small Business Federation and the Korea Employers Federation.[13] The JoongAng Ilbo reported on the support measures for small businesses and small businesses, which amount to four trillion won, and criticized it as "unpopular populism all over the world".[14] In addition, the Dong-A Ilbo reported on companies that decided to move their factories overseas because of a minimum wage increase.[15] Ju Jin-hyung, who has served as general affairs policy committee chairman of the Democratic Party, pointed out through a Facebook post that the promise of the "minimum wage 10,000 won" promise and ambiguity, and lack of standard and impression standards.[16]

Many scholars, however, welcomed and endorsed the minimum wage increase. Jeong Tae-in, an economist and chief of the Karl Polanyi Center for Socio-Economic Studies, wrote a column in the progressive journal Kyunghyang Shinmun. He argued in the column that the minimum wage increase does not affect employment: first, college students and young people who work part-time will reduce labor hours if the minimum wage goes up. Second, if the self-employed are concerned about the minimum wage increase, it is likely that it is due to the pressures of a franchise headquarters. Third, he argues reducing business hours to eight hours a day would not reduce the sales of consumer goods by one-third, as some insist. If the minimum wage increase is the policy priority, shortening the operating hours will be a policy to compensate. The government only has to assure convenience stores, franchisees, and manufacturing subcontractors the right to organize 'Eul(을)'.[17]

Kim Chang-hwan, a professor of sociology at the University of Kansas, USA, also objected to Ju Jin-hyung's argument. In his blog he wrote, "The effect of the minimum hourly rate on the labor market is not established academically. The theory of economics suggests that if the minimum hourly rate is increased, the employment rate decreases. But the reality is that the minimum rate is cleaner than the theory." He also pointed out that there is a disagreement about whether it is bad for employment to decline by raising the minimum wage, and that high wages have the effect of promoting structural reforms and forcing productivity improvements. He said, "If businesses and self-employed people who can not afford the minimum wage are closed, the capital is absorbed into capital that can give more than the minimum wage, rather than being publicly decomposed. In this case, the productivity of the economy as a whole is improved and structural upgrading is forced." Professor Kim also pointed out that the conservative press, which is promoting the 'minimization of employment by the minimum wage', is using the 'minimum wage increase' as a means of ideological struggle even though the new minimum wage is not applied yet. And he criticized Ju Jin-hyung, "If the minimum wage increase was a big problem, you should criticize the increase by 9% over 1989 and 12 times over 30 years. Until now, you have been quiet, but once the minimum wage raised the 16%, you can not criticize the minimum wage increase policy. If the Korean economy was ruined because the minimum wage was high, it would have been ruined."[16][18]