KCCI "Next Year's Minimum Wage Will Have a Huge Negative Impact on Employment... Objection Raised"

[Asia Economy Reporter Ki-min Lee] The Korea Employers Federation (KEF) announced on the 15th that it will officially raise objections to the '2022 Minimum Wage Proposal,' which was decided at an hourly wage of 9,160 won.

The KEF explained, "We decided to raise objections because the 2022 minimum wage proposal decided on the 12th threatens the survival of small and micro enterprises and small business owners who are trying to endure the ongoing COVID-19 crisis, and it is feared that it will have a significant negative impact on the employment of vulnerable workers."

After the minimum wage proposal was announced, the KEF plans to raise objections focusing on the following points: ▲issues with the basis for calculating the 5.1% increase in the 2022 minimum wage ▲excessive increase in the minimum wage despite the difficulty in finding factors for increase among the four minimum wage decision criteria exemplified by law ▲insufficient consideration of the difficulties faced by small and micro enterprises and small business owners, who are the main payers of the minimum wage ▲and the decision not to apply differentiated minimum wages by type of business.

First, the KEF emphasized that it is inappropriate to apply the method used by the Minimum Wage Commission to calculate next year's minimum wage increase rate as 5.1% by adding the economic growth rate (4.0%) and the consumer price inflation rate (1.8%) and then subtracting the employment increase rate (0.7%) at this point in time.

They pointed out that this method was not considered in past minimum wage decisions, which led to excessively high increases, but it was suddenly used in this year's deliberations.

According to the Minimum Wage Commission's calculation method, the minimum wage during the current government (2018?2022) should have increased by 15.6%, considering the cumulative economic growth rate of 11.9%, consumer price inflation rate of 6.3%, and employment increase rate of 2.6% over the past five years (2017?2021, based on deliberation points), but the actual minimum wage increased by 41.6%.

The KEF also pointed out that although it is difficult to find factors for minimum wage increases among the four decision criteria exemplified in the Minimum Wage Act (living expenses, wages of similar workers, labor productivity, income distribution), the minimum wage was excessively increased this year. While the minimum wage does not have to be calculated strictly based on the numerical values of these four criteria, the KEF argued that a 5.1% increase is excessive given the lack of increase factors in these criteria.

Furthermore, if the 2022 minimum wage is finalized at 9,160 won per hour, considering the weekly holiday allowance, the actual minimum wage in Korea will reach 11,000 won per hour (for workers working more than 15 hours per week), which most small and micro enterprises and small business owners will find difficult to bear.

Additionally, there are various differences by industry in terms of companies' payment capacity, working conditions, and productivity, but the uniform minimum wage increase has caused a serious situation where the gap in the rate of workers earning below the minimum wage between industries reached 40.4 percentage points last year (42.6% in accommodation and food services, 2.2% in information and communications).

Ryu Ki-jung, Executive Director of KEF, stated, "The minimum wage is a mandatory regulation that all employers must comply with regardless of their payment capacity," and added, "Therefore, small and micro enterprises and small business owners with weak payment capacity will face increased difficulties due to this minimum wage increase, and it is feared that this will have a huge negative impact on employment."

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