Discussion on 2027 Minimum Wage Begins: "Dilemma Expected Amid Middle East-Driven Inflation"

Amid ongoing uncertainty stemming from the Middle East war, the review process for next year's minimum wage will begin on April 21. The surge in oil prices is driving up inflation, resulting in falling real wages for workers and higher costs for employers. As a result, both sides are expected to face a dilemma over the rate of increase in the minimum wage. In particular, since last year's minimum wage increase was limited to 2.9%, there is a widespread expectation that labor groups will propose a much larger hike this year.

The 7th plenary meeting of the Minimum Wage Commission for 2026 held last June at the Government Complex Sejong. Photo by Yonhap News

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The Minimum Wage Commission, under the Ministry of Employment and Labor, will hold its first plenary session at 3 p.m. on this day at the Government Sejong Complex. All 27 members-including representatives of workers, employers, and public interest-are scheduled to attend and receive the review request from Minister of Employment and Labor Kim Young-hoon. A commission official stated, "At the first plenary session, we plan to elect a new chairperson and vice-chairperson, who are currently vacant, and discuss the schedule for the next meetings."

Again this year, the main point of contention is the extent of the minimum wage increase. Due to the aftermath of the U.S.-Iran war, oil prices have soared, and the won-dollar exchange rate has also risen, intensifying inflationary pressure more than ever. The International Monetary Fund (IMF) recently raised its inflation forecast for Korea this year dramatically from 1.8% to 2.5%.

The labor side is expected to demand an increase of around 7% to prevent real wage declines caused by high inflation. In the early stages of the discussions, they may even strategically propose a rate higher than 7%. On the other hand, the employer side is likely to call for a freeze, arguing that with soaring oil prices already increasing costs, any further rise in labor costs would be unsustainable for small business owners and small- and medium-sized enterprises.

Last year, the minimum wage increased by 2.9% (290 won) compared to the previous year, marking the second-lowest first-year increase under any administration. Typically, the first year of a new government sees an agreement on a relatively high minimum wage hike, but this time the situation was different. The first-year minimum wage increase rates were 7.2% under the Park Geun-hye administration, 16.4% under the Moon Jae-in administration, and 5.0% under the Yoon Suk-yeol administration. Consequently, there is a strong expectation that labor groups will not easily back down this year.

This year, the Minimum Wage Commission will also, for the first time, discuss whether to apply the minimum wage to "contract workers"-such as delivery riders-a long-standing demand of labor groups. In his prior review request, Minister Kim specified, "Please consider whether to set a separate minimum wage for contract (or similar) wage workers for whom it is deemed inappropriate to determine the minimum wage on an hourly, daily, weekly, or monthly basis."

Last year, public interest members of the commission had requested that the Ministry of Employment and Labor investigate the status, scale, income, and working conditions of contract workers subject to the minimum wage and submit the findings for the 2027 review. The commission is expected to deliberate based on these findings.

The issue of industry-specific application of the minimum wage, as proposed by employers, will also be revisited. The industry-specific system was implemented only once, in the first year of the minimum wage system in 1988. Since 1989, a single minimum wage system has been maintained.

Meanwhile, the commission is required to determine the minimum wage level and submit it to the Minister of Employment and Labor by June 29, which is 90 days from the date of the minister’s request. However, due to wide differences between labor and management, the review has been completed within this period on only nine occasions.

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