Considering Economic Conditions, Only a 2.5% Increase Amid '10,000 Won in Sight'

On the 19th, the public interest members of the Minimum Wage Commission sided with the business sector, which proposed a minimum wage of 9,860 won for next year. This reflects the judgment that the economic situation is challenging, resulting in a decision to set the minimum wage increase rate for next year at 2.5%.

The biggest point of interest in the decision process and the minimum wage for next year was whether the minimum wage would surpass 10,000 won for the first time in history. Early in the deliberations, considering the inflation rate and previous minimum wage increase rates, the prevailing view was that "it might exceed 10,000 won."

Although the consumer price inflation rate in June was 2.7%, marking the first time in 21 months that it was in the 2% range, this year's inflation rate was between 3% and 5%. Also, considering that the minimum wage increased by 10.9% in 2019, 5.1% in 2022, and 5.0% in 2023, the labor sector believed that at least 10,000 won or more was possible. The increase rate to reach 10,000 won was 3.95%.

Business Sector Maintains Psychological Barrier of '10,000 Won'

The labor sector initially proposed 12,210 won as the minimum wage for next year on June 22. The business sector's initial proposal was 9,620 won, resulting in a gap of 2,480 won. After several revisions, the gap narrowed to 180 won, but the labor sector insisted on 10,020 won in both the 9th and final 10th proposals. They held firm on the minimum wage being above 10,000 won until the end.

The decision on the minimum wage through a vote was somewhat expected. At the 9th plenary meeting, Park Junsik, chairman of the Minimum Wage Commission, said, "We hope to narrow the gap between labor and management as much as possible so that a resolution can be reached through agreement," adding, "If agreement is difficult, a decision by vote may be inevitable." In reality, since labor and management failed to reach an agreement, the final demands of both sides were put to a vote, and ultimately, the business sector's proposal was adopted with 17 votes in favor, 8 votes for the labor sector's proposal, and 1 abstention.

The labor sector immediately protested. Kim Junyoung, a worker member and secretary-general of the Korean Metal Workers' Federation, was detained while staging a sit-in protest, resulting in one fewer worker member participating in the vote. Currently, the Minimum Wage Commission consists of 26 members: 8 worker members, 9 employer members, and 9 public interest members. Ryu Gisub, secretary-general of the Korean Confederation of Trade Unions and a worker member, protested by walking out, stating, "This year's minimum wage was decided at a level that does not even meet the economic growth rate and inflation rate," and added, "This is tantamount to a real wage cut."

The public interest members' vote in favor of the business sector's proposal is interpreted as reflecting the weak domestic economic recovery following the COVID-19 pandemic. In particular, the difficulties faced by small business owners and micro-entrepreneurs were taken into account. The symbolic concern over the minimum wage exceeding "10,000 won" also appears to have influenced the decision.

Reflecting the Burden on SMEs and Small Business Owners

At the 9th plenary meeting, the business sector also expressed concerns about the increased burden on small and medium-sized enterprises (SMEs) and small business owners. Ryu Kijeong, secretary of the employer members and executive director of the Korea Employers Federation, said, "It is clear that the cumulative high-rate increases in the minimum wage decided and implemented so far, and its uniform application rather than partial application, have directly increased the burden on small SMEs and small business owners," adding, "If next year's minimum wage is raised again to a level that small SMEs and small business owners cannot bear, it will take away their hope and could also exacerbate difficulties for the national economy."

Lee Myungro, head of the Human Resources Policy Division at the Korea Federation of SMEs, also pointed out, "A high level of minimum wage increase without considering the payment capacity and debt situation causes consumer inconvenience due to reduced business hours, employment reduction among unskilled vulnerable groups through automation and unmanned stores, and leads to the proliferation of short-time workers linked to weekly holiday pay," adding, "This results in increased prices of products and services, which will stimulate inflation that has recently shown a stable trend, ultimately causing a vicious cycle where the living expenses burden of low-wage workers does not decrease."

Although the breakthrough of the "10,000 won minimum wage" for next year was abandoned, only 140 won remains to reach 10,000 won. Physically speaking, it is expected that the minimum wage will comfortably exceed 10,000 won in 2025.

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