[Takryucheongron] Seeking Job Coexistence Through Freezing the Minimum Wage

Heo Hee-young
Professor, Department of Business Administration, Korea Aerospace University

"With the minimum wage, can't part-time workers even afford a roll of kimbap or a bowl of ramen?" This was a rhetorical question I posed at a policy debate titled 'Minimum Wage: Medicine or Poison?' in response to how the political and labor sectors exaggerated a statement made by a certain 'thoughtful' celebrity. If you earn 45,000 won a day, of course, you can buy ramen and kimbap. However, the voices of small business owners and SMEs were drowned out, and the minimum wage rose steeply. The minimum wage, which was 5,580 won per hour in 2015, is now 8,590 won. Working eight hours a day amounts to 69,000 won. But does this satisfy all convenience store part-timers who work day and night? On the contrary, countless part-time jobs have disappeared due to the minimum wage increase. Low-wage workers in simple occupations are still being pushed out of workplaces. A society where workers are respected?why has that dream become so distant? Behind the deepening income inequality lies the rapid increase in the minimum wage.

The minimum wage is a system that enforces the minimum price for individual labor. Since 1928, under the leadership of the International Labour Organization (ILO), it has been introduced worldwide following the global economic depression. It is a different concept from household income, which includes the combined earnings of dual-income couples or college students' part-time jobs. Assuming the minimum wage as the living cost per household is the first mistake. The positive function of increasing income through the minimum wage is only possible when employers can afford it.

Employers who lack the ability to pay must choose either to reduce staff or pay wages below the minimum wage. Due to the rapid increase in the minimum wage, last year the proportion of workplaces paying below the minimum wage rose to 16.5%. One or two out of every ten employers became lawbreakers subject to imprisonment of up to three years or fines up to 20 million won for violating the Minimum Wage Act. The second misunderstanding and delusion was believing that the state could control employers' ability to pay.

The minimum wage debate always takes place on an uneven playing field. There is one boss and many workers. In addition to political interests and consideration for the weak, labor unions attack the greed of management, while employers take a defensive stance to persuade workers to maintain their businesses. Compared to other countries, the narrow scope of minimum wage inclusion, weekly holiday allowances, and a single wage system that does not distinguish by industry, age, region, or nationality distort the minimum wage. Intentional misreading of statistics and factional logic have exacerbated the dysfunction of this system. According to estimates by the Korea Employers Federation (KEF), Korea's 2019 minimum wage was 63% of the median wage. Even by current standards, this ranks sixth among 28 OECD countries.

The economy is sinking due to the impact of the novel coronavirus disease (COVID-19). The damage to small and micro enterprises and small business owners is more severe due to consumption stagnation, decreased tourists, and social distancing. A survey showing that 70% of SMEs cannot survive six months under current conditions is grave. In this disastrous situation, the labor unions' claims and solutions are misguided. The Federation of Korean Trade Unions (FKTU) declared a struggle to achieve a 10,000 won minimum wage, and the Korean Confederation of Trade Unions (KCTU) set their slogan as 'Minimum Wage to Make a Living.'

Besides the 70% external dependence of our economy, another reason for the worsening reality is the reckless increase in the minimum wage and the implementation of the 52-hour workweek, which have already led to a prolonged recession. Although fiscal input may have immediate effects, the situation will gradually worsen, and business closures will increase. Instead of labor and management clashing over the minimum wage, they should seek ways to coexist. Wage negotiations should be left to labor-management agreements within companies. If the minimum wage is to play a role even in severe recessions, it should be frozen to persuade workers and encourage employers. This is consideration and respect for workers leaving their jobs and companies at the crossroads of survival. Now is the time for labor and management to put their heads together for the survival of companies.

Heo Hee-young, Professor, Department of Business Administration, Korea Aerospace University

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