"Relief for Small Business Owners" vs "Worker Discrimination": What Do You Think About Yoon's 'Differentiated Minimum Wage System'?

Yoon President-Elect's Labor Pledge 'Minimum Wage System Reform'
Regional and Industry-Specific Minimum Wage Differentiation
Some Advanced Countries Already Implementing
Concerns Over Regional 'Stigma Effect' Side Effects
Experts: "Must Consider Increased Diversity of Domestic Industries"

President-elect Yoon Seok-yeol is giving a greeting at the disbandment ceremony of the People Power Party's presidential election headquarters held on the afternoon of the 10th at the National Assembly Library in Yeouido, Seoul. / Photo by Yonhap News

[Asia Economy Reporter Lim Juhyung] With the victory of President-elect Yoon Seok-yeol in the 20th presidential election, discussions on reforming the statutory minimum wage system are expected to become a 'hot topic.' During his presidential campaign, Yoon repeatedly emphasized that the minimum wage should be applied differentially by region and industry to ease the burden on small and medium-sized enterprises (SMEs).

The so-called 'minimum wage differentiation system' is already implemented in some advanced countries that have introduced the minimum wage system. The logic is that even within the same country, there are detailed differences in unemployment rates and average wages by region, so the minimum wage should be applied accordingly.

However, public opinion on the minimum wage differentiation system is sharply divided. Some advocate it as a necessary reform to reduce the burden on self-employed and small business owners, while others oppose it, arguing that it is essentially 'discriminatory treatment' of workers based on region or industry.

◆President-elect Yoon: "Can SMEs pay the same wages as large corporations?"

Yoon's labor pledge can be summarized as 'economic revitalization through labor market flexibility.' His major labor-related pledges during the presidential campaign included 'flexibilization of the 52-hour workweek system' and 'differential application of the minimum wage.' The former involves adjusting maximum working hours for certain industries upon agreement between labor and management, while the latter proposes setting different minimum wages by region and industry.

Regarding this, Yoon emphasized the importance of labor market flexibility several times during street campaigns. On the 7th, at a campaign rally in Anyang, Gyeonggi Province, he said, "There are 25 million workers in our country, but only about 1 million (4%) are represented by strong labor unions," adding, "Of course, it’s good to raise wages, but try telling self-employed and SMEs, which lack the ability to pay, to raise wages to the same level as large corporations."

He continued, "While 4% of workers might be happy, self-employed and SMEs will all collapse, and workers willing to work for slightly less than the minimum wage will lose their jobs."

On the 7th, President-elect Yoon during the campaign in Gyeonggi Province. / Photo by Yonhap News

He also stated, "The minimum wage is set to guarantee workers' human rights," adding, "It’s not possible to raise it just because 4% ask for it. Workers in large and conglomerate companies receive high wages and work under the best conditions. They have a proper seniority system, so when the minimum wage rises, their wages increase steadily. Income-led growth was created for that 4%," criticizing the policy.

The argument is that applying the minimum wage uniformly regardless of business conditions could shrink employment creation capacity and harm low-income workers.

◆Some foreign countries apply differentiation... concerns over 'widening regional gaps'

The idea of 'differential application of the minimum wage' is not new in Korea. Currently, the statutory minimum wage is set through the Minimum Wage Commission under the Ministry of Employment and Labor, which includes representatives from both management and labor. The management side has continuously argued for differential application by industry, region, and company size.

However, except for the year the minimum wage system was first introduced in 1988, Korea has never implemented a differentiation system.

Unlike Korea, some countries abroad have adopted minimum wage differentiation. Australia, which set an hourly minimum wage of 20.33 Australian dollars (about 18,411 KRW) last year and holds one of the highest minimum wage systems among OECD countries, is a representative example. Australia sets the federal minimum wage payment standard at age 21, with reduced rates for younger workers. It also applies differentiated minimum wages based on workers' skill levels, from the lowest to the highest.

In 2020, Japanese citizens in a busy district of Tokyo. Japan classifies local governments into four categories based on economic levels and applies differentiated minimum wages accordingly. / Photo by Yonhap News

In Japan, local governments nationwide are classified into four grades based on price and wage levels, and minimum wages are applied differentially accordingly.

The reason these countries finely differentiate minimum wages by skill and region is to prevent job losses. Since economic revitalization levels vary by company, industry, and region, flexible application of the minimum wage is necessary to minimize the impact on low-wage workers' jobs.

However, there is also opposition arguing that the minimum wage differentiation system could worsen regional inequality. Previously, from September to December 2017, the Ministry of Employment and Labor operated a 'Minimum Wage System Improvement Task Force,' where 18 experts recommended by labor, management, and public interest commissioners reviewed the effects of regional minimum wage differentiation.

The conclusion was that regional differentiation of the minimum wage would ▲stigmatize regions with low wages, ▲cause labor migration from low-wage to high-wage areas, and ▲produce adverse effects that undermine national unity and balanced regional development.

◆"Adjustment needed" vs. "Only increases worker conflicts" - Citizens debate

Public opinion is divided on the differential application of the minimum wage. Mr. A, a self-employed restaurant owner in his 30s from Paju, Gyeonggi Province, said, "Workers may strongly oppose it, but it is a necessary reform for self-employed and small business owners," adding, "There are fewer jobs and poorer accessibility in rural areas compared to the metropolitan area, so having to pay part-time workers the same wages as in Seoul was too burdensome."

Mr. B, in his 20s working in the food service industry, said, "From the perspective of frequently changing workplaces, it is more advantageous to find jobs easily than to have wages rise," adding, "If the boss isn’t making money, worker wages can’t just increase. Some adjustment is necessary."

On the other hand, Ms. C, a 20-something university student earning living expenses through part-time work, said, "I strongly oppose regional differentiation. Who would come all the way here to work if wages are lower just because it’s a rural area?" expressing frustration, "It will only intensify the population concentration in the metropolitan area."

In South Korea, the Minimum Wage Commission under the Ministry of Employment and Labor, which includes both management and labor representatives, sets the statutory minimum wage. / Photo by Yonhap News

Another university student, Ms. D, said, "I believe equal pay should be given for equal work. The differentiation system will only cause conflicts among workers working together."

Experts suggest that since the economic environment now differs from when the minimum wage system was first implemented domestically, multifaceted discussions are necessary.

Professor Kim Taegi of Dankook University's Department of Economics pointed out, "The domestic environment now is very different from when the minimum wage was first introduced in 1988. Industries have become much more diverse, gaps between companies have widened, and differences in regional industries between cities with manufacturing and service sectors and rural areas have increased," adding, "It is true that we need to consider whether it is possible to apply the exact same minimum wage to all workers across all regions and industries under these circumstances."

He continued, "There are concerns that differential minimum wage payments could cause discrimination, but the core purpose of introducing the minimum wage is to help the poor," adding, "We need to carefully consider whether a high minimum wage can have a positive impact on rural areas, the elderly, and the poor, where jobs are currently scarce."

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