Surprising differences in minimum wage increases in South Korea vs. developed countries 2023 07

South Korea’s minimum wage hike and labor-management conflict The need for principles that ensure social empathy

 

As part of our activities as a Coupang Partner, we receive a percentage of commissions from the following.

The current situation and labor-management conflict

The recent increase in South Korea’s minimum wage has led to growing discontent among labor and management.

The rate of increase over the past seven years has been record high, and the minimum wage is currently no more than 10,000 won, including weekly vacation pay.

As part of our work as Coupang Partners, we receive a commission for our efforts.

Minimum wage in 2023 and 2024

As of 2023, the minimum wage in South Korea is set at 9,860 won per hour.

In 2024, it is expected to increase by 2.5% to over $10,000.

The minimum wage

1. Minimum wage increase and employer backlash

Impact on small businesses

Small businesses are particularly concerned about their ability to pay and the impact on their business. If they have to raise the price of their menu to pay the minimum wage, demand will decrease, affecting sales.

Proposing a differential by industry

To resolve the debate between workers and employers, a sliding scale has been proposed. By adjusting based on the industry with the lowest ability to pay, a more reasonable result would be achieved.

The phenomenon of self-employed people giving up night work

Some self-employed people are declaring themselves non-operational at night due to the burden of having to pay nighttime workers in addition to the weekly holiday pay. This is causing more difficulties for convenience store owners and small business owners.

2. minimum wage increase and workers’ demands

Rate of increase vs. inflation

It has been argued that the rate of increase is not keeping up with the rate of inflation, so the actual income of workers is decreasing.

The Weekly Vacation Pay System and Convenience Store Owners’ Difficulties

Due to the weekly rest allowance system, convenience store owners are increasingly giving up due to the burden of night work and labor costs.

Complaints from military personnel and low-level civil servants

Military personnel and low-level civil servants are also dissatisfied with the increase, and there are calls to raise the starting salary and wage level for civil servants.

3. Problems and Improvements in minimum wage Calculation

The need to establish principles and social consensus

It is important to establish principles and achieve social consensus in the calculation. It should be determined with certain criteria rather than an ad hoc method.

Advantages and considerations of applying industry differentials

Applying a sliding scale can help reduce conflict around raises, and you should consider which industries need higher wages.

Social awareness and the purpose of the minimum wage

The purpose is to ensure a minimum decent life. We need to improve social awareness to create an environment that respects and supports workers’ rights and interests.

As part of our work as a Coupang Partner, we receive a small commission for doing so.

As part of our activities as a Coupang Partner, we receive a percentage of commissions from the following.

4. Global comparison: South Korea’s minimum wage position

Rate of increase in South Korea: South Korea started to see a significant increase in 2018. In 2018, there was a significant increase of 16.4%, and since then, there have been small annual increases. Recently, it was decided to increase by 2.5% to 9,860 won in 2023. This rate of increase has caused dissatisfaction among labor and management.

Rates in developed countries: On the other hand, developed countries are somewhat different from Korea. In developed countries such as the United States, Japan, France, and Germany, the minimum wage increase rate is relatively lower than in South Korea. In most developed countries, the rate of increase is around 2-5% per year, especially in the wake of the recent recession and coronavirus pandemic.

Surprising differences: The most surprising difference is that South Korea’s rate of increase is significantly higher than that of developed countries. In the seven years since 2018, South Korea’s minimum wage has increased by 52.4%, while developed economies have remained relatively flat. This has made South Korea’s minimum wage one of the highest in Asia, increasing the burden on executives and small businesses.

This stark disparity is contributing to the economic situation and labor-management conflicts in South Korea, making it even more important to discuss the problems with the minimum wage calculation and how to improve it. The time has come for a careful review of Korea’s minimum wage policy in comparison to the rate of increase in developed countries.

Minimum wage comparison with major developed countries

South Korea’s minimum wage is higher than some major developed countries, but the rapid rate of increase should be considered.

South Korea (as of 2023)
Minimum wage: KRW 9,860
Increase rate: 2.5% (compared to the year before the increase)
United States (as of 2023)
Federal: $7.25 per hour (approximately $8,355)
Higher local minimum wage may apply in some states
Japan (as of 2023)
Hourly: Approx. 8745 yen (based on Tokyo, varies by region)
France (as of 2023)
Hourly: approximately 15,931 (EUR 10.25)
Germany (as of 2023)
Hourly: approximately 19% increase to EUR 9.6
Australia (as of 2023)
Hourly rate: approximately $18.367 (AUD 20.33)

The US is on the lower end, while Germany and Australia are on the higher end. South Korea is comparable to France, but lower than Germany, Australia, and Japan.

Wage growth and economic impact in South Korea

The rate and economic impact of wage increases in South Korea has been an issue of great interest in recent years. While wage increases are aimed at improving the living standards of workers and redressing labor market imbalances, they can also lead to higher labor costs for employers and reduced competitiveness.

In South Korea, the rate of increase is determined annually, taking into account the country’s economic conditions and social factors. The increase is calculated by the government’s Minimum Wage Committee, which considers inflation, economic growth, and employment growth, and is determined by social consensus with input from major labor and employer representative organizations.

In recent years, the rate of increase has been quite high. For example, in 2023, it was raised by 2.5% to 9,860 won. While these high rates can have a positive impact on workers, they can also lead to higher labor costs for employers.

The increase can contribute to improving the living standards of workers and reducing income inequality. An increase in the minimum wage for workers can increase the income of low-income earners and improve household incomes. This can lead to increased spending activity and stimulate the economy.

On the flip side, however, increases can be a labor cost burden for some businesses, leading to job cuts or increased costs. Small and medium-sized businesses in particular may struggle to operate with increases, which can lead to job losses and a decrease in a company’s competitiveness.

Additionally, if the increase is higher than the rate of inflation, it may result in a decrease in real wages as the increased wages do not keep up with inflation. This can limit workers’ ability to improve their standard of living.

Given these economic impacts, determining the appropriate level and direction of an increase is important and requires social consensus and ongoing observation and analysis. We need to find a compromise between labor and management, and support from small businesses and corporations. By doing so, we should strive to ensure that the increase achieves both the improvement of the quality of life of workers and the stabilization of the economy.

5. 5 questions about the minimum wage

What is a minimum wage?

A minimum hourly wage is an amount determined and set by the government to ensure that workers are paid a minimum wage.

How is it determined?

It is calculated annually by the government’s Minimum Wage Committee, taking into account inflation, economic growth, and employment growth.

It is determined by social consensus with input from major labor and employer representative organizations.

How does Korea compare to other countries?

The minimum wage in South Korea is quite high when compared to other major industrialized countries such as Japan and the United States.

However, in recent years, the rate of increase has been increasing rapidly, leading to labor-management conflicts.

How does the increase affect both workers and employers?

For workers, the increase can provide a higher hourly wage, raising their standard of living, but for employers, it can increase their labor cost burden and affect their business.

What are the advantages and disadvantages of raising the minimum wage? The advantages may include a higher standard of living for workers, a reduction in income disparity, and social stability. The disadvantages may include a decrease in employers’ ability to pay, a decrease in corporate competitiveness, and a decrease in jobs.

6. The need for a minimum wage that ensures social consensus

It should be determined based on social consensus and be reasonable, taking into account income levels across society.

7. Finding realistic solutions

We should seek ways to resolve labor-management conflicts related to the increase by applying differentials by industry and improving social awareness.