The Korean government has yielded to growing pressure for moderation in wage hikes in the face of worsening business conditions by endorsing a marginal increase only seen in crisis-hit periods.
The Minimum Wage Commission, a tripartite panel of government, business and labor representatives, set the statutory hourly minimum wage at 8,590 won ($7.30) for 2020, up 2.9 percent from the current 8,350 won. This is significantly slowed from the 16.4 percent jump in 2018 and the 10.9 percent hike this year.
In the commission’s final vote, fifteen members backed the management’s proposal for 8,590 won, while 11 favored the laborers’ bid for 8,880 won. One abstained from voting.
The result suggests the nine government representatives with the casting vote sided more with the management even if it meant surrendering President Moon Jae-in’s campaign pledge to make the hourly base wage 10,000 won within the first three years of his term.
The only other times the minimum wage increased by less than 3 percent was in 1998-1999, when it rose 2.7 percent following the Asian financial crisis, and in 2010, when it rose 2.8 percent in the aftermath of the global financial meltdown.
The move is expected to trigger strong backlash from laborers, the core support base of the liberal government.
Steep minimum wage hikes and shorter work hours have been signature policies of Moon’s income-led growth initiative, which seeks to drive the country’s economic growth by improving the incomes of average Koreans. But the administration has faced growing calls to shift its policy stance in the face of deteriorating economic data.
Asia’s fourth-largest economy grew at its slowest pace in 10 years, contracting 0.4 percent on quarter in the first three months of this year, as exports slumped amid rising global trade tensions. This has prompted the finance ministry to slash this year’s economic growth outlook to 2.4-2.5 percent from 2.7 percent, the weakest growth in seven years.
Korea’s job market has also remained sluggish. While the pace of job creation picked up in June on the back of heavy government spending in the public sector, the number of jobless people hit a 20-year high, with the unemployment rate hovering in the 4 percent range for the sixth straight month.
By Chung Seok-woo and Kim Hyo-jin
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]