"Shock and Powerlessness"... Business Community Raises Criticism Over 5.1% Minimum Wage Increase (Comprehensive)

Park Junsik, Chairman of the Minimum Wage Commission, is reviewing documents after the 9th plenary session on the night of the 12th, where the minimum wage for next year was decided to be 9,160 won.
[Image source=Yonhap News]

[Asia Economy Reporter Kim Heung-soon] The business community, which had opposed the minimum wage increase due to concerns over the fourth wave of COVID-19 and worsening employment conditions, strongly reacted after the minimum wage for next year was decided at 9,160 won, a 5.1% increase from this year.

On the 13th, major economic organizations such as the Korea Employers Federation (KEF), the Federation of Korean Industries (FKI), and the Korea Chamber of Commerce and Industry (KCCI) expressed strong regret using terms like "shock" and "powerlessness," stating that the proposed minimum wage increase for next year "clearly exceeds the payment capacity of small and micro enterprises and small business owners pushed to the brink, and ignores economic realities."

"Concerns Over Worsening Employment Market Conditions"

KEF, which represented the employers' position and participated as a user representative in the negotiations, criticized, "We appealed for the survival of marginal and micro enterprises, employment stability for vulnerable groups, and the creation of more jobs, but the public interest commissioners ignored the reality faced by those pushed to the brink." They added, "The responsibility for all problems arising from this lies with the labor sector and public interest commissioners who repeatedly engaged in selfish struggles while ignoring economic realities."

The FKI also released a statement saying, "The minimum wage has sharply increased by an average of 7.7% annually over the past four years, greatly exceeding the average annual economic growth rate (2.7%) and inflation rate (1.1%) during the same period." They warned, "The increase in the minimum wage, which ignores economic realities, is worsening the business environment and pushing merchants, self-employed individuals, and entrepreneurs to their limits, raising concerns about exacerbating unemployment." The KCCI also argued, "The rise in the minimum wage is intensifying management difficulties for small and medium-sized enterprises and small business owners, and there are concerns it will further deteriorate employment market conditions."

Previously, these major economic organizations had expressed concerns that the sharp rise in the minimum wage over the past three to four years had caused small and self-employed business owners, feeling the burden, to close their stores or reduce jobs, thereby impacting the employment market. According to related industries such as refining and distribution, the minimum wage increased by a total of 32.8% from 2017 to 2020, and the number of self-service gas stations nationwide without employees rose by more than 40%, from 3,169 in 2017 to 4,460 last year. A fast-food franchise installed unmanned ordering machines, which can be set up at about 10% of the monthly minimum wage, in 60% of its stores, resulting in a reduction of 1,230 part-time jobs.

"Need for Institutional Improvements to Reduce Social Disputes and Conflicts"

The business community argued that the minimum wage system needs to be supplemented considering these realities. The FKI urged, "The government and political circles should step up to minimize side effects of the minimum wage increase by applying differentiated rates by industry and job category, and including companies' payment capacity as a factor in determining the minimum wage."

The KCCI also emphasized, "The government should promptly prepare support measures such as expanding job stabilization funds," and stressed, "To reduce recurring social conflicts every year and increase economic predictability, the minimum wage determination system should be reformed to calculate based on objective indicators."

KEF stated, "The business community once again expresses deep concern over the high minimum wage increase made amid the current employment crisis, where over one million young people are in a potential unemployment state," and urged, "The government should actively seek ways to mitigate the adverse effects on the national economy caused by this."

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