In today’s economy, a 10,000-won bill doesn’t stretch very far, whether you’re shopping at the supermarket or dining at a local lunch spot. It’s not uncommon for a simple bowl of Korean cold noodles, or “naengmyeon,” to cost more than this amount. For years, the 10,000-won mark has been a psychological threshold, representing the divide between what’s considered cheap and what’s not so cheap.
However, this symbolic barrier is set to change. Next year, the nation’s minimum wage will officially surpass this level. The Minimum Wage Commission, composed of representatives from the business, labor, and public sectors, has agreed to raise the minimum wage by 1.7 percent to 10,030 won ($7.30) per hour.
While this is the second- smallest raise since the 1.5 percent adjustment in 2021, it represents a landmark moment as the minimum wage officially crosses into the 10,000-won territory for the first time ever. Starting next year, a laborer working 40 hours per week at the new minimum wage will earn up to 2,096,279 w
on ($1,515) per month. While this sum may not seem massive, it provides essential stability for those in low-paying jobs.
The recent increase in South Korea’s minimum wage, while historically significant, has sparked discontent among various groups due to its economic implications. Despite the landmark achievement of raising the minimum wage to 10,030 won per hour, the substantial rise in recent years, combined with ongoing inflation, has stirred considerable debate and dissatisfaction.
In the seven years following the beginning of the Moon Jae-in administration, the minimum wage in South Korea surged by an impressive 52 percent. This rapid increase reflects a commitment to improving the living standards of low-income workers, but it has also intensified scrutiny.
With Korea’s consumer inflation projected to be 2.6 percent this year, many workers argue that the recent wage hike amounts to a cut in real wages. While the nominal increase might seem significant, the actual purchasing power of workers is dimin
ished when inflation is taken into account.
However, employers are protesting the increased burden that the higher minimum wage places on their businesses. The Korea Federation of Micro Enterprises has warned that the higher minimum wage will force many small businesses to reduce their workforce. They fear that the increased labor costs will make it unsustainable to maintain current levels of employment.
The concerns of small business owners about the increased burden of the new minimum wage are valid, given their limited financial resources and the high closure rate of businesses reported by Statistics Korea. However, it is also important to acknowledge the positive effects of the wage increase, which brings stability and improved morale to low-paid workers.
Adjusting the minimum wage annually is a delicate matter, especially because self-employed individuals and small businesses constitute a significant portion of the Korean economy. The government needs to be proactive in managing potential negative eff
ects, such as rising prices and the financial strain on small businesses.
The wage commission could benefit from conducting a comprehensive, on-the-ground study to assess whether past minimum wage increases have led to job losses in Korea. Such a study would provide precise and credible data for commission members to use in the wage-setting process.
Overall, Korea should reconsider how its minimum wage is set and applied. For instance, the Minimum Wage Commission should have labor representatives who are non-regular workers and also those in the 20s and 30s age group to reflect varying needs. Also, once decided, Korea’s minimum wage is uniformly applied to all sectors unlike other advanced economies. The United States and Canada apply the minimum wage differently by region, while Japan applies the minimum wage varyingly by region and by sector. It is time for the government and politicians to take a serious look at revamping the minimum wage process.
Under the current system, self-employed individuals and
small business owners are facing mounting financial pressure. As a result, some are being forced to close their businesses. To address this issue, the minimum wage system should be reformed in a way that supports both workers and employers across all sectors. One potential solution is for the government to exempt specific groups of employers, such as small business owners and certain industries, from the minimum wage requirements. This approach could help balance the needs of workers with the financial realities faced by small businesses.
Source: Yonhap News Agency
