Tue, Jul 18, 2017 - Page 11 News List

S Korea hikes minimum wage to keep Moon vow

INFLATIONARY POLICY?During his election campaign Moon Jae-in pledged to be a ‘jobs president,’ and to raise the minimum wage to at least 10,000 won by 2020

Bloomberg

South Korea’s minimum wage is set to increase next year by 16 percent to 7,530 won (US$6.68) per hour, the biggest jump since 2001, giving South Korean President Moon Jae-in an early victory in his push to boost incomes.

Moon is seeking to nudge the economy away from its export dependence to a structure that relies more on household spending, which makes higher pay and quality jobs more important. He has pledged to be a “jobs president” and to raise the minimum wage to at least 10,000 won by 2020.

The decision over the weekend by the South Korean Minimum Wage Commission ends more than a month of tug-of-war between labor and business representatives. Labor advocates had initially requested a 55 percent increase, while business representatives suggested just 2.4 percent.

About 12 percent of workers were receiving the minimum wage or lower in 2015, according to an estimate by the Korea Labor Institute.

The finance ministry on Sunday said in a statement that the government would give financial aid to some small business owners to help them pay for part of the pay increase.

To meet Moon’s 10,000 won goal, the minimum wage would need to keep increasing by about 15 percent every year, compared with average gains of 7.4 percent over the past five years.

Businesses with five or more employees increased pay to their overall workforces by an average 3.8 percent last year from previous year, according to the Korea Labor Institute.

“For [South] Korea, where the social welfare system is weak, workers are more dependent on income and a higher minimum wage is important from a human rights perspective,” said Seoul-based Konkuk University economics professor Choi Pae-kun, who supports the 10,000 won target.

South Korea’s minimum wage started in 1988 at the equivalent of half a US dollar per hour. The low start made the pace of annual increase higher than those of overall wages, but the level still lags peers in the Organisation for Economic Co-operation and Development (OECD).

Comparative figures for last year show South Korea’s minimum wage at about US$5.80 per hour, similar to Israel and Poland, but lower than Japan at about US$7.40 and about half of Germany’s, according to OECD data.

Nomura International economist Kwon Young-sun yesterday said in a report that small businesses might pass on part of the burden by increasing retail prices, which adds upside potential to Nomura’s 2 percent inflation forecast for next year.

Kwon said higher inflation could lead to the Bank of Korea raising its key interest rate sooner than Nomura’s forecast for a hike in the second half of next year.

This story has been viewed 1214 times.

Comments will be moderated. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned.

TOP top