Failed to Secure Minimum Wage at 8,000 Won Level... Dark Clouds Loom Over Korean Economy

5.1% Increase 'Bolt from the Blue'... Government Labor Regulations Compound 'Outcry'
Direct Hit to Korean Economy Across the Board... Ignoring Differential Application by Industry and Region
Failure to Appease Labor Sector... 1.1 Million Members of Minju No Chong General Strike
"Polarization Deepens Due to Minimum Wage Issue... Will Hold Responsible"

On May 13th, a cosmetics store in Hoehyeon Underground Shopping Center, Jung-gu, Seoul, closed down due to the impact of COVID-19. / Photo by Mun Ho-nam munonam@

[Sejong=Asia Economy Reporter Moon Chaeseok] This year's negotiations to determine next year's minimum wage unfolded with significant differences in the formation of battle lines, negotiation goals, and justifications between labor and management. The business sector's goal and justification were to 'maintain the 8,000 won range (defend a 3.1% increase) and protect small business owners and self-employed,' while the labor sector aimed for '9,270 won or more (secure a 6.3% increase) and to make up for two years of stagnation.' From this perspective, the negotiations ended in a decisive victory for labor, with management failing to meet both its objectives and justifications. The '9,000 won era' could not be delayed amid the fourth wave of the COVID-19 pandemic.

Overlapping with Government Labor Regulations... A Full-Scale Blow to the Korean Economy

On the first day of the Level 4 social distancing measures in the Seoul metropolitan area on the 12th, the Hongdae area in Mapo-gu, Seoul appeared quieter than usual. Under the Level 4 measures, gatherings of up to 4 people are allowed before 6 p.m., and only up to 2 people are allowed afterward. Photo by Moon Honam munonam@

This year, the risk to management increased significantly due to the combination of minimum wage hikes and regulatory policies pushed by the Ministry of Employment and Labor. From July 1 to 13, business owners received news including ▲the arrival of the 9,000 won minimum wage era ▲application of the 52-hour workweek without a grace period for businesses with fewer than 50 employees ▲legislative notice of the Enforcement Decree of the Serious Accident Punishment Act ▲expanded risks of union activities within workplaces for dismissed workers due to amendments to the Labor Union Act ▲application of employment insurance to 12 special employment types (special types of workers, or "teukgo") excluding substitute drivers and quick service (including riders). All of these factors contribute to increased costs and management risks.

For this reason, many found it difficult to dismiss the management sector's argument for 'protecting small business owners and the self-employed' as merely a tired claim. The resistance was considerable because the challenging business environment, where 'there is nothing left to gain' from the employer's perspective, was influenced not only by disasters like COVID-19 but also by policies both inside and outside the government.

However, management did not only make abstract claims like 'overcoming COVID-19.' They specifically pointed to the food and lodging industries and pushed for differentiated application by industry for the first time in 34 years. They also proposed regional differentiated application considering the trends of COVID-19 confirmed cases and quarantine levels by region. Rather than suspicion that these were 'initial pressure tactics' in negotiations, many evaluated these as timely negotiation cards. However, these proposals were blocked in voting and failed to be properly implemented at the final negotiation stage, the 9th plenary meeting.

Ongoing Controversy Over Calculation Criteria... Industry and Regional Differentiated Application Claims Ignored

Park Junsik, Chairman of the Minimum Wage Commission (left), looks toward the meeting room 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. (Photo by Yonhap News)

It is difficult to blame only the management's negotiation power. The public interest commissioners, who play a decisive role in the decision-making process of the Minimum Wage Commission, did not accept the labor side's opinions either. The labor sector demanded a minimum wage reform to reach a minimum living wage level well above 10,000 won, or at least a 7.5% increase (applying a 6.3% increase for next year), which is higher than the average annual increase during the Park Geun-hye administration within the Moon Jae-in administration's term. However, the public interest commissioners presented a completely different formula.

The formula is 'economic growth rate (4.0%) + consumer price inflation rate (1.8%) - employment increase rate (0.7%).' This formula faced strong criticism because it includes workers with median income as well as minimum wage workers. It was pointed out that it does not align with the justification in Article 1 of the Minimum Wage Act, which is 'to stabilize the livelihood of low-wage workers and improve the quality of labor.'

Another issue was that during the Moon Jae-in administration, the actual increase rate was higher than the formula suggested. According to the Korea Employers Federation, applying this formula to the Moon administration's minimum wage period (2018?2022) shows that over five years (based on deliberation years 2017?2021), considering a cumulative economic growth rate of 11.9%, consumer price inflation of 6.3%, and employment increase of 2.6%, the minimum wage should have increased by 15.6%. In reality, it rose by 41.6%.

Failing to Appease Labor... Korean Confederation of Trade Unions Resolves 1.1 Million General Strike

On the afternoon of the 3rd, Juno Federation members held a National Workers' Rally while occupying the road in Jongno 3-ga, Seoul, demanding a complete revision of the labor law. (Image source=Yonhap News)

Another major reason this year's negotiations have been heavily criticized is that they failed to gain the labor sector's sympathy. Just before the end of the 9th plenary meeting, at 11:19 p.m. on the 12th, Park Hee-eun, Vice Chairperson of the Korean Confederation of Trade Unions (KCTU), stormed out of the negotiation room, warning that the KCTU would raise issues about the minimum wage increase at the 1.1 million general strike scheduled for October 20.

The October general strike is also a pledge of Chairman Yang Kyung-soo, who was elected at the end of last year, but it is highly likely that the KCTU will condemn the Minimum Wage Commission for the low minimum wage increase rate at this event. There is even speculation that this will be used as a major negotiation card in next year's presidential election to directly pressure candidates from the ruling party. The KCTU has declared that it will hold the minimum wage responsible for worsening labor inequality, polarization, and income disparity during the general strike.

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