Failed to Achieve and Only Amplified Social Conflicts... The 10,000 Won Minimum Wage Pledge Left Only Scars

Sharp Increase to 10% Range Early in Administration
Criticism Amid Worsening Employment Indicators
Labor Also Dissatisfied with Expanded Inclusion Scope

Annual Meetings Marked by Labor-Management Conflicts
Minnochoeng and Hannocheong Clash in Labor Disputes

Two key figures who played pivotal roles as representatives of employers and workers respectively in the nine plenary sessions of the Minimum Wage Commission. On the left is Ryu Ki-jung, Executive Director of the Korea Employers Federation (KEF), and on the right is Lee Dong-ho, Secretary General of the Federation of Korean Trade Unions (FKTU).
(Photo by Yonhap News)

[Sejong=Asia Economy Reporter Moon Chaeseok] The Minimum Wage Commission set next year's minimum wage at 9,160 won per hour, making it impossible to fulfill the Moon Jae-in administration's pledge to reach 10,000 won. Analysts say that the 'excessive enthusiasm' of sharply raising the minimum wage by 16% and 10% annually in the early years of the administration became a misstep, leading to unsatisfactory results for both management and labor sectors.

In 2017, the first year of the Moon Jae-in administration, the minimum wage was 6,470 won, as decided by the Minimum Wage Commission in 2016 during the last year of the Park Geun-hye administration. Next year's minimum wage is 41.6% higher than that. The amount increased by 2,690 won, which corresponds to an average annual increase of 7.2%.

The current government strongly attempted to raise the minimum wage from the beginning of its term to realize the 10,000 won minimum wage pledge. The minimum wage for 2018, decided by the Minimum Wage Commission in the first year of the government, was set at 7,530 won, a 16.4% increase from the previous year, and the following year's minimum wage was raised by 10.9% to 8,350 won.

However, when domestic employment growth slowed to as low as 3,000 people per month in 2018, employment indicators worsened, leading to criticism that the sharp increase in the minimum wage was the cause. Consequently, last year's minimum wage rose by only 2.9% to 8,590 won, significantly slowing the upward trend. Additionally, due to the unprecedented crisis caused by the COVID-19 pandemic last year, the minimum wage increase rate was 1.5%, the lowest ever recorded.

In particular, the government faced criticism from labor groups when it expanded the scope of minimum wage inclusion in 2018.

Choi Young-gi, a visiting professor at Hallym University’s Business Administration Department and former director of the Korea Labor Institute, said, "Over the five years of the Moon Jae-in government, and nine years including the Park Geun-hye government, the minimum wage has increased by more than 7% annually on average, placing a significant burden on the labor market. If the minimum wage rises too quickly, employers' ability to pay inevitably weakens, and the problem was that the increase was too abrupt."

The Minimum Wage Commission based next year's 5.1% increase on factors such as economic growth rate. It added the average of next year's economic growth forecasts of 4.0% announced recently by the Ministry of Economy and Finance and the Bank of Korea to the inflation forecast of 1.8%, then subtracted the employment growth rate of 0.7%.

Kwon Soon-won, the public interest member secretary of the Minimum Wage Commission, explained, "There was a consensus that next year’s decision should assume the economy will return to normal from the COVID-19 crisis. We mainly used this year's economic growth forecast."

The intense labor-management conflicts and some labor-labor conflicts during the meeting process also remain as blemishes. The Korean Confederation of Trade Unions (KCTU) fiercely protested that five of the nine worker representatives should be from their union. One Minimum Wage Commission member said, "In nine plenary meetings, newly joined members from both labor and management frequently made strong statements, and both sides often engaged in heated debates among themselves rather than expressing their views to specific public interest members. At times, KCTU members showed discomfort with the expressions of the Federation of Korean Trade Unions (FKTU) members," he said.

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