Minimum Wage Talks Strain as Labor Seeks 16.3% Hike, Business Cites Hardship

Minimum wage talks strained from the get-go

Negotiations between business and labor over next year's minimum wage formally began Tuesday at the Minimum Wage Commission. Labor representatives proposed raising the hourly minimum wage by 16.3 percent, from this year's 10,320 won to 12,000 won, equivalent to a monthly wage of 2.508 million won based on a 209-hour work month. Labor groups argued that a minimum hourly wage lower than the cost of a single lunch no longer reflects basic public expectations.

Yet Korea's experience during the Moon Jae-in administration, when rapid minimum wage hikes placed heavy pressure on small businesses, shows why both sides should seek a balanced compromise rather than another sharp increase.

A survey released Tuesday by the Korea Enterprises Federation illustrates the difficult reality facing self-employed business owners. Among 500 respondents nationwide, 57 percent said business conditions had worsened compared with last year. Asked about an appropriate increase for next year's minimum wage, the largest share, 44.6 percent, favored freezing it. Nearly 60 percent said they had no remaining capacity to hire additional workers, while 34 percent reported earning less each month than this year's minimum monthly wage of 2.156 million won.

Minimum wage policy should reflect economic conditions as well as employers' ability to pay. Last year, 2.769 million workers, or 12.4 percent of all wage earners, received less than the legal minimum wage, suggesting the current system already fails to protect many workers it is intended to help.

The accommodation and food service sector faces particularly severe pressure, with 31.6 percent of workers earning below the minimum wage. Employer groups proposed allowing differentiated minimum wages at least for Korean restaurants, foreign restaurants and snack bars such as gimbap (seaweed rice rolls) shops, arguing that small businesses in these sectors cannot absorb rising labor costs. The proposal, however, was rejected at last week's Minimum Wage Commission meeting.

It is regrettable that the concerns of struggling small business owners continue to be dismissed year after year. Many members of the Organisation for Economic Cooperation and Development, including the United States, Japan and France, do not rely on a single nationwide minimum wage but differentiate wage floors according to region, industry, age or skill level.