Job Committee: "Labor Income Share Increased by 5.5%P During Moon Administration... Impact of Minimum Wage Hike"

62% in 2017 → 67.5% in 2020, a 5.5%P increase
Low-wage workers' share reduced from 22.3% to 16%

"Impact of job-centered economic management including minimum wage increase"

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Moon Chaeseok] The government announced that since the inauguration of the Moon Jae-in administration in 2017, the distribution of labor income has improved and the proportion of low-wage workers has decreased. It self-assessed that the improvement can be attributed to the Moon Jae-in administration’s job-centered economic management, including minimum wage increases. However, since the data focuses on distribution performance, only the wage trends of low-wage workers earning less than two-thirds of the median wage were presented, while detailed statistics on the middle class and high-income workers were not disclosed.

The Presidential Committee on Jobs announced on the 26th that it published Issue Brief "Q&A" No. 10 containing this information. According to the Jobs Committee, the labor income distribution rate has increased by 5.5 percentage points (p) since 2017. The labor income distribution rate refers to the proportion of value added distributed as compensation for labor. The Bank of Korea calculates it by dividing workers’ compensation in the national accounts by the sum of compensation and operating surplus. The average labor income distribution rates by government were 60% under the Roh Moo-hyun administration, 60.3% under the Lee Myung-bak administration, 62.1% under the Park Geun-hye administration, and 64.9% under the Moon Jae-in administration, showing an upward trend. The difference between the first and last years of each government was 0.8%p for Roh Moo-hyun, -0.7%p for Lee Myung-bak, 1.4%p for Park Geun-hye, and 5.5%p for Moon Jae-in. Kim Yong-gi, Vice Chairman of the Jobs Committee, stated, “Key job policies such as minimum wage increases based on job-centered national governance, increased demand in the social service sector, and wage increases for related workers have led to an increase in the labor income distribution rate and a reduction in wage inequality during the Moon Jae-in administration.”

By sector, the increase in labor income was significant in the social service sector. Over four years from 2016 to 2019, public administration increased by 13.6 trillion won, healthcare by 11.5 trillion won, and educational services by 8.9 trillion won. As jobs increased in social service sectors such as civil servants for public welfare and health and welfare, the labor income distribution rate expanded, and the quality of social public services also improved, according to the Jobs Committee. An example of service quality improvement is the clearance rate of the four major violent crimes, which rose from 76.1% in 2016 to 76.8% last year. Vice Chairman Kim said, “We will strive to continuously promote policies to create quality jobs in the social service sector and improve the quality of social services in parallel with fair economic policies.”

The Jobs Committee also reported improvements in wage inequality. The proportion of low-wage workers earning less than two-thirds of the median wage decreased from 22.3% in 2017 to 16% last year. The average proportion of low-wage workers by government was 25.0% under Roh Moo-hyun, 24.6% under Lee Myung-bak, 23.9% under Park Geun-hye, and 18.6% under Moon Jae-in. The 10th decile wage ratio was 4.77 under Lee Myung-bak, 4.65 under Park Geun-hye, and 3.86 under Moon Jae-in. Notably, it fell from 4.57 in 2016 to 3.63 in 2019. The 10th decile wage ratio is an indicator of wage inequality, with lower values indicating reduced disparity. The analysis suggests that minimum wage increases led to wage growth in the low-wage group, contributing to improved wage inequality. The impact of minimum wage increases on wage growth in the low-wage group (deciles 1 to 5) was 8.14% on average in 2018 and 6% on average in 2019. The total wages of these workers increased by 11.6 trillion won in 2018 and 8.6 trillion won in 2019.

The Jobs Committee emphasized the need to continue job-centered national governance going forward. This means continuing to push job policies focused on inducing wage increases for low-income workers as a national agenda. According to the Jobs Committee, Korea’s proportion of low-wage workers ranked 9th among 22 OECD countries with available statistics (as of 2019), and its 10th decile wage ratio ranked 10th among 38 countries. The Committee stated, “Considering that fair compensation for small and medium-sized enterprises (SMEs) is a condition for economic growth, policies to create fair competition conditions between large and small-medium enterprises should be pursued in parallel, which will enhance the competitiveness of small business owners and SMEs and amplify the effects of minimum wage increases. It is also necessary to simultaneously establish a management system that provides quality services responding to public demand through policies that make social service jobs quality jobs and continuous training.”

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