Politicized minimum wage
Provide substantive benefits based on objective criteria
After nearly four months of tug-of-war, next year's minimum wage has been set.
As always, however, it satisfied neither employees nor employers while reaffirming problems with how the decision is made every year.
The time has long passed to overhaul the system.
Last Wednesday, the 27-member Minimum Wage Commission raised the wage floor by 2.5 percent to 9,860 won ($7.65) an hour and about 2.06 million won monthly. The increase rate was the second-lowest in history, falling short of the 3.4 percent inflation. Union representatives were right to express their frustration. "Real wages dropped," they said.
Still, Korea's hourly minimum wage is the 13th-highest worldwide, matching the nation's gross domestic product ranking. Owner-operators and employers hiring five workers or fewer criticized the commission for "failing to freeze" it for 2024.
It took the commission ? comprising nine members, each representing employers, employees and the public interest, i.e., the government ? 110 days to decide. The period was the longest since Korea introduced the system in 1988. Again, management and labor failed to agree, leaving nine public interest members to decide. The two sides have only reached an agreement in seven of the 36 years.
Labor representatives tried to attain the symbolic 10,000 won figure while their counterparts representing employers did all they could to thwart it. That recalls U.S. workers' struggles to get a minimum wage of $15 a decade ago. Employers believed the minimum wage, which soared by more than 40 percent during the five years of the previous Moon Jae-in administration, needed speed control. However, the minimum wage of 10,000 won was the joint pledge of all presidential candidates in 2017.
Economists said higher minimum wages would lead to job losses "once upon a time in America." Their Korean counterparts still do so. However, it has long been proven in the U.S. that higher wages help to reduce poverty without reducing jobs. Of course, things are different in Korea, which has too many self-employed people running convenience stores, chicken places and take-out coffee shops. They hire a few part-timers and stage live-or-die competitions. That explains why the minimum wage decision has become the "war between have-nots" in this country.
It was unpleasant in this regard to see the Korea Employers Federation play the hypocrite recently. "Nearly 13 percent of workers cannot get even the existing minimum wage, and the comparable rate goes up to 30 percent in businesses with five workers or fewer," the KEF said. That was a thinly veiled call for freezing the minimum wage.
To solve this problem, the government tries to differentiate even the meager minimum wage by age, region and business lines. At first glance, this seems reasonable. However, it will only create a new "least paid" class and aggravate social division.
There are other ways the government can resolve this problem. It should rectify large companies' unfair and unilateral extortion of their smaller subcontractors. It must also expand the Korean version of the Earned Income Tax Credit (EITC) for small and medium-sized enterprizes (SMEs). It can apply lower electricity rates and cut other costs for self-employed convenience store owners.
However, it's doubtful whether the pro-business, anti-labor government will do so. Such skepticism deepens while watching it call for reducing unemployment allowances, calling it "syrup benefit" ? a pun with "sil-eop," a Korean word meaning joblessness. Officials cited young women buying Chanel sunglasses with jobless benefits. Korea is like America in the 1980s when Ronald Reagan rebuked welfare queens driving Cadillacs.
However, Korea is not America and now is not the 1980s.
Korea's minimum wage remains half of America's and one-third of Denmark's. The global ranking or national comparison is meaningless, considering Korea's social safety net is almost the poorest among OECD nations.
This is no time for politicizing basic welfare, including minimum wages. It has been proven worldwide that the fountain effect, not the trickle-down effect, revives the economy.
Any further widening income and wealth gap will only speed up this country's demographic extinction.
Source: Yonhap News Agency