[Exclusive] User Side "Will Demand Minimum Wage Freeze"... Pursuing Industry-Specific Differentiation

Minister of Employment Requests 2021 Minimum Wage Review from the Minimum Wage Commission Today
Business Sector Unlikely to Demand 'Cut' to Avoid Extreme Labor-Management Conflict
Labor Sector Deliberating... Limited Flexibility Due to COVID-19 Economic Downturn

[Image source=Yonhap News]

[Asia Economy Reporter Kim Bo-kyung] Amid the ongoing impact of the novel coronavirus infection (COVID-19), the business community is expected to demand a 'freeze' on next year's minimum wage. This marks a step back from last year when they advocated for a 'reduction' in the minimum wage. It is a decision aimed at avoiding extreme conflicts between labor and management during this economic emergency. However, small and medium-sized enterprises (SMEs) and small business sectors, which are on the brink of survival due to the COVID-19 crisis, are expected to strongly push for sector-specific differential application of the minimum wage.

According to the Ministry of Employment and Labor on the 31st, Minister Lee Jae-gap requested the Minimum Wage Commission to review the 2021 minimum wage on the same day. According to the Minimum Wage Act, the Minister of Employment and Labor must request the minimum wage review by March 31 each year. The Minimum Wage Commission must deliberate and decide on the minimum wage proposal within 90 days from the date of the review request, and the Minister must finalize and announce it by August 5.

The core issue in next year's minimum wage discussions is the COVID-19 situation. It is anticipated that labor and management will engage in a tug-of-war over the economic impact of COVID-19. For now, the business community holds the position that the current minimum wage of 8,590 won should be maintained next year. A user committee member told Asia Economy in a phone interview, "It is reasonable and sensible to freeze the minimum wage," adding, "I don't think the labor representatives will strongly oppose it." He continued, "We will not push for a decrease either," and predicted, "Given that all citizens are suffering, I expect negotiations to proceed with a sense of community without extreme conflict between labor and management."

Last year, user committee members proposed 8,000 won, lower than the minimum wage of 8,350 won at that time. The labor side immediately protested and boycotted the meeting, harshly criticizing the business community as engaging in "unreasonable behavior" and "insulting low-wage workers." The business community's decision to propose a freeze on the minimum wage this time appears to be aimed at preventing a breakdown of the Minimum Wage Commission.

[Image source=Yonhap News]

SMEs and small business sectors, which have been hit hard by COVID-19, are poised to argue for sector-specific differential application as in previous years. A user committee member said, "To wisely overcome the economic crisis caused by COVID-19, a rational wage system must be established," adding, "(Sector-specific differential application) is a key task to modernize the minimum wage system." Last year, the Minimum Wage Commission put the sector-specific differential application proposal to a vote, but it was rejected by a majority of public interest committee members.

The labor side's stance, which has persistently demanded a 10,000 won minimum wage, is also drawing attention for potential changes. Currently, labor representatives are reportedly deliberating on an appropriate minimum wage demand level considering the COVID-19 situation.

Initially, the labor side was expected to demand a significant increase in the minimum wage, citing the low increase rate this year, but the COVID-19 crisis has increased the likelihood of them being on the defensive. The minimum wage increase rate this year was 2.87%. This was the third-lowest increase rate following 2.7% during the IMF (International Monetary Fund) foreign exchange crisis from September 1998 to August 1999, and 2.75% in 2010, right after the global financial crisis.

However, predictions that the global economy will fall into a deeper recession due to the COVID-19 shock than during the IMF foreign exchange crisis or the financial crisis have narrowed the room for maneuver. Public opinion favors reducing the burden on the business community as the economic damage from COVID-19 spreads throughout the real economy.

Park Joon-sik, Chairperson of the Minimum Wage Commission, emphasized the current emergency situation and indicated his intention to strive for a smooth agreement between labor and management. In a phone interview with Asia Economy, Chairperson Park said, "The entire country and the world are in an emergency due to COVID-19," adding, "It is inappropriate to cause noise or confusion over trivial matters." He continued, "We will consider both labor and management positions thoroughly in the discussions."

This content was produced with the assistance of AI translation services.