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(EDITORIAL from Korea Times on July 19)

All News 07:14 July 19, 2016

Minimum wage dispute
Institutional remedies needed to tackle annual row

The Minimum Wage Council has set next year's minimum wage at 6,470 won ($5.7) per hour. This represents an increase of 440 won, or 7.3 percent, from this year's 6,030 won. The new monthly minimum wage amounts to about 1.35 million won for those who work 209 hours per month, and the Ministry of Employment and Labor said the pay raise would affect 3.36 million workers.

The decision satisfied neither labor nor management.

The labor circle, which wanted the hourly minimum wage to be raised to 10,000 won, slammed the decision, saying the government has ignored the desperation of workers by not allowing a double-digit increase.

The Korea Employers Federation, which represents employers, said the decision would add to the woes of smaller firms and self-employed business owners already grappling with difficulties. "The raise will mean that workplaces with fewer than 30 employees have to spend an additional 2.5 trillion won every year," a federation official said.

Given the need to ensure the livelihoods of low-income workers and widening polarization, it's disheartening that next year's minimum wage increase falls short of this year's 8.1 percent growth.

But raising the legally-set wage without due consideration to economic conditions will cause a lot of problems. The biggest problem is whether smaller firms and self-employed persons can be sustainable even after paying the hiked minimum wage. Also, job losses might worsen as employers, burdened with higher labor costs, could avoid hiring people.

What is most disturbing is that the minimum wage has been determined by the 27-member Minimum Wage Council in the absence of labor representatives almost every year, and this year is no exception. On Friday night, all nine representatives from labor left the council meeting after showing dissatisfaction with the proposed increase, and only members representing management and the public interest took part in the voting.

Given that all members representing the public interest are appointed by the President, it looks as if the government decided on the minimum wage. In fact, labor and management have concurred on the minimum wage only twice since 2007.

All this explains why there should be institutional remedies to this long-standing problem. Some critics propose that the National Assembly decide on the minimum wage, but it's questionable if the legislature can be up to that task given lawmakers' intrinsically populist tendencies.

The bottom line is that the minimum wage should be determined scientifically, based on the economic growth rate, inflation, average wage increases and other economic factors.

But what is most important is to ensure that the minimum wage rule must be observed properly at workplaces. A report released by the Korea Labor & Society Institute showed that some 2.64 million employees, or 13.7 percent of total wage workers, were paid less than this year's minimum wage as of March. But only 0.2 percent of 33,000 employers caught for violating the minimum wage rule from 2011 to 2015 faced judicial action, raising the urgent need to apply the rule strictly.

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