A tripartite commission kicked off deliberations Thursday to set the country’s minimum wage for next year, even as the coronavirus pandemic and other economic problems are worsening unemployment at a steep pace.
The 27 members of the commission, nine each representing labor, business and the wider public, are running against time to reach a conclusion by the legal deadline of June 29.
The minimum wage -- applied to all workplaces across the nation -- has risen 33 percent over the past three years to 8,590 won ($7.22) per hour.
The minimum wage hike has been one of the pillars of the income-led growth policy pursued by President Moon Jae-in’s administration since he assumed office in May 2017. During his election campaign, he pledged to raise the wage floor to 10,000 won per hour by 2020.
The hourly minimum wage increased 16.4 percent on-year to 7,530 won in 2018, the steepest rise in 17 years, followed by a 10.9 percent hike to 8,350 won in 2019.
The increase rate slowed to 2.9 percent this year amid mounting calls to adjust the pace of wage growth to cushion the fallout from previous steep hikes.
The sharp wage increase, coupled with other pro-labor measures taken by the Moon government, has driven mostly low-wage workers out of their jobs as many employers, particularly small businesses, have been pushed to cut their payrolls to cope with rising personnel expenditures. Subsidies offered by the government to offset increased wage costs have done little to prevent low-skilled temporary and part-time workers from losing their jobs.
Since the first new coronavirus case was reported here in January, the crisis has exacerbated the country’s unemployment problem.
According to data released Wednesday by Statistics Korea, the number of jobless people jumped 11.6 percent from a year earlier to 1.27 million in May. The unemployment rate rose 0.5 percentage point on-year to 4.5 percent last month. Both figures were the highest ones for the month since related data began being compiled in June 1996.
The number of employed people fell by 392,000 to 26.93 million in May, marking the third consecutive monthly decline. It was the first time that the country recorded net job losses for three months in a row since October 2009 in the aftermath of the global financial crisis.
The COVID-19 outbreak, which has further dampened already-weakening consumer spending and corporate activity, has dealt a particularly harsh blow to the wholesale and retail sector and the accommodation and food service segment. More than 370,000 jobs disappeared last month in the two business categories.
Management and labor remain divided over a wage increase for next year.
Labor groups are calling for a significant rise, saying low-paid workers in particular are suffering from the economic impact of the coronavirus outbreak.
Whereas the business community says most employers can hardly endure any additional wage hike. Local listed firms saw their combined operating profit drop more than 30 percent in the first quarter of this year, and their profitability is expected to worsen further down the road.
A recent poll showed 6 out of 10 small and medium-sized companies plan to reduce employment if the minimum wage is increased next year.
Now is the time to focus on retaining jobs rather than squabbling over wage increases.
The government needs to be more active in ensuring the Minimum Wage Commission sets the 2021 rate at the lowest possible level. It should go so far as to guide the members of the commission representing the general public to minimize the increase.
Over the past few years, members selected by the government have held the key to setting the minimum wage. The losing side -- representatives of either management or labor -- has boycotted the final vote.
In the long term, the administration should push for the revision of legislation to change the process of deciding the wage floor. The formation of a separate panel consisting of independent experts, which would be tasked with suggesting upper and lower limits for the minimum wage, could help set it at a more reasonable level.
Commission members should also pay heed to calls for the differentiated application of minimum wage regulations by industry, region and corporate size. It might be necessary to freeze the wage at least in some sectors -- those most vulnerable to higher labor costs.