3.01 Million Minimum Wage Workers Last Year... 250,000 More Than Previous Year

13.7% of Workers Earn Below Minimum Wage
Rising Again Since Last Year After 3 Consecutive Years of Decline
KEF "Need to Adjust Increase Speed... Also Apply Differentiated Rates by Industry"

On the 14th, when the term of the 13th members of the Minimum Wage Commission began, a 2024 minimum wage signboard was installed at an Employment Welfare Plus Center in Seoul. The commission plans to hold its first plenary meeting for next year's minimum wage review next week. Photo by Jo Yongjun jun21@

Last year, the number of workers earning less than the minimum wage (9,620 KRW per hour) increased by about 9% compared to the previous year, reaching 3.01 million.

On the 16th, the Korea Employers Federation (KEF) analyzed data from Statistics Korea's August 2023 Economically Active Population Survey and other sources to release the "2023 Minimum Wage Underpayment Rate Analysis Report." According to the report, the number of workers who did not receive the statutory minimum wage last year was 3,011,000, an increase of about 255,000 from the previous year. The proportion of workers earning below the minimum wage (minimum wage underpayment rate) also rose by 1.0 percentage point during the same period, reaching 13.7%.

During 2018-2019, the minimum wage increased by 29.1%, causing the number of workers earning below the minimum wage to surge to 3,386,000 in 2019. Although this number decreased to 2,756,000 by 2022, it has again surpassed 3 million. The minimum wage underpayment rate, which peaked at 16.5% in 2019, declined for three consecutive years until 2022 but rose again last year.

KEF analyzed that the rapid cumulative increase in the minimum wage has led the market to be unable to fully accept the minimum wage. This is because, compared to 2001, the consumer price index and nominal wages increased by 69.8% and 159.2% respectively by 2023, while the minimum wage rose by 415.8%.

KEF also explained that even when limited to the period after 2019, which was affected by COVID-19, the minimum wage increase rate was steep. The cumulative increase rate of the minimum wage from 2019 to 2023 was 15.2%, while the inflation rate and nominal wage increase rate during the same period were 12.2% and 13.2%, respectively.

The minimum wage underpayment rate showed significant differences by industry and company size. By industry, agriculture, forestry, and fisheries had the highest underpayment rate at 43.1%, followed by accommodation and food services at 37.3%. Association and other services (25.3%) and health and social welfare (21.7%) also exceeded the overall industry average of 13.7%. The gap with industries such as water supply, sewerage, and waste management (1.9%), professional, scientific, and technical services (2.1%), and information and communication (2.4%) widened to as much as 41.2 percentage points.

By company size, smaller businesses had higher minimum wage underpayment rates. Among 3,829,000 workers at workplaces with fewer than 5 employees, 32.7% (1,253,000) earned less than the minimum wage. In contrast, the underpayment rate at workplaces with 300 or more employees was only 2.2%.

According to data from the Organisation for Economic Co-operation and Development (OECD) on the "proportion of workers earning below the minimum wage," South Korea ranked second among 25 OECD member countries in 2021 with 19.8%. This figure is nearly three times the average of 7.4% across the 25 countries. It far exceeds the figures of major countries such as Japan (2.0%), Germany (4.8%), the United Kingdom (5.9%), and France (12.0%).

Ha Sang-woo, head of KEF's Economic Research Department, stated, "The minimum wage underpayment rate in South Korea was 13.7% in 2023, which is already very high, but when considering the legally mandated paid weekly holiday hours, it could rise to 24.3%. Since some industries and small businesses are struggling to bear even the current minimum wage level, it is necessary for the minimum wage to stabilize for a considerable period going forward. Additionally, it is important to consider applying differentiated minimum wages according to industry-specific business environment differences."

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