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[Editorial] Credibility gap

Moon vows steps on minimum wage, but Labor Ministry not lowering bar for employers

President Moon Jae-in has vowed to take complementary measures related to minimum wage hikes. However, the Ministry of Employment and Labor appears to be moving to make the minimum wage more burdensome for employers.

The ministry plans to revise an enforcement ordinance of the Minimum Wage Act to recognize the weekend (Saturday and Sunday) as working hours in the calculation of the minimum wage.

Parliamentary approval is not needed to revise an enforcement ordinance because an ordinance is not a bill. The ministry is scheduled to submit the ordinance to a Cabinet meeting next week. If the Cabinet approves it, the new ordinance will take effect next year.

In Korea, the minimum wage is determined at an hourly rate. Therefore, if working hours increase, so will the wage an employer must pay.

To check if an employer is paying the legal minimum wage, the monthly wage is divided by the number of working hours for the actual paid hourly wage to be compared with the minimum wage. If working hours increase due to the acknowledgement of the weekend as working hours, the hourly wage paid by an employer will decrease.

Some large Korean companies recognize 16 hours over the weekend as working hours through collective bargaining with labor unions. They pay a “weekend allowance” for 16 hours of work to those employees who work five days a week.

If a monthly salary is 1.7 million won ($1,500) and the weekend is not recognized as working hours, the hourly wage is 9,770 won, above next year’s minimum wage of 8,350 won. However, if 16 hours over the weekend are considered working hours, the hourly wage will drop to 8,134 won, falling short of the 2019 minimum wage.

The ministry seems to be seeking to revise the related ordinance to appease labor unions after the National Assembly passed a revised minimum wage bill in June to include regular bonuses and welfare benefits in the minimum wage, despite strong opposition from labor groups. The bill reduces the effects of the minimum wage hike.

From a legal point of view, recognizing the weekend as working hours is controversial. A Supreme Court ruling excludes the weekend from working hours. Still, the ministry is pushing to include weekends when workers do not go to work as part of working hours.

It appears inappropriate for the ministry to try to circumvent the court ruling by revising an ordinance, not by taking legislative procedures, even though it runs counter to the ruling.

From next year, violation of the Minimum Wage Act will become a criminally punishable offense, even if workers agree to receive less than the minimum wage. Therefore, the minimum wage will be a serious issue for employers. Seventeen business organizations, including the Korea Employers Federation and the Korea Federation of Micro Enterprises, issued a joint statement demanding only actual working hours be acknowledged as working hours. They also demanded that this issue be resolved not by a Cabinet meeting, but by the National Assembly.

This year’s minimum wage rose 16.4 percent from last year’s. It was a drastic hike that led to the closure of many self-employed businesses and the loss of many minimum wage jobs. Despite the circumstances, next year’s minimum wage is supposed to rise 10.9 percent from this year’s.

According to a survey by the Korea Federation of SMEs on business outlook for next year, 52.5 percent of surveyed companies said that labor cost will make it more difficult to survive.

If the actual paid hourly wage is calculated to be lower than the minimum wage, employers are more likely to face criminal punishment. About 3.11 million workers are reportedly estimated to receive less than the minimum wage.

Moon said in the first meeting of his presidency with economy-related ministers on Monday that he would come up with complementary measures on minimum wage if necessary.

During a briefing by the Ministry of Trade, Industry and Energy on its 2020 policy on Wednesday, he also said that the government needs to reflect on whether it has been attentive to business complaints and whether it has communicated well with companies.

On the other hand, the Labor Ministry appears to be looking away from small businesses and self-employed people that are in a predicament due to the sharply raised minimum wage.

If the government’s words do not correspond with its actions, how can businesses be expected to trust the government, increase investment and raise employment?