2020’s minimum wage to rise 2.9% to 8,590 won

After haggling for 13 hours, the Minimum Wage Council Friday finally reached an agreement to set next year’s minimum wage at 8,590 won ($7.30)per hour, a 2.9 percent increase from this year’s.

This will be the lowest increase since the minimum wage was raised 2.75 percent in 2010, and the third-lowest since the minimum wage system was adopted in 1988.

Among 27 members on the council, 15 voted in favor of the 8,590 won proposed by representatives of businesses, while 11 voted for the 8,880 won suggested by labor.

One member didn’t vote.

The labor side immediately expressed frustration with the outcome and suggested protests might follow Friday’s decision.

The Federation of Trade Unions released a statement saying that a “major catastrophe” had occurred, claiming that the Moon Jae-in administration’s promise of policies that respect workers and a 10,000 won per hour minimum wage by 2020 had been revealed as “complete” lies.

The wage approved by the council will be submitted to the Minister of Labor and Employment, which has until Aug. 5 to make it official.

Either labor or the business side can raise objections, and if the labor minister accepts them, the wage decision can be sent back to the council for review.

Initially, labor representatives proposed a 10,000 won minimum wage for next year, which was a campaign promise by President Moon Jae-in. This would have been a 19.8 percent hike from this year’s.

The opening suggestion by representatives of employers was that next year’s minimum wage be lowered 4 percent to 8,000 won.

On Wednesday, the two sides came out with a second round of proposals. Labor asked for 9,570 won, a 14.6 percent increase, while business asked for 8,185 won, which would have been a 2 percent cut from this year’s level.

The business representatives on the council said any hike similar to the ones in the last two years would really hurt the economy.

“We hoped that this would be an opportunity to reduce the difficulties that small and medium businesses have been going through while revitalizing the economy,” a statement from the business representatives released Friday said.

Korea’s economy, weakened from exports falling for seven consecutive months and foreign direct investments shrinking 37 percent in the first half, faces additional headwinds such as the ongoing trade dispute between the United States and China as well as growing tensions with Japan that resulted in Tokyo restricting the supplies of key materials needed in manufacturing semiconductor and displays.

Sharp hikes in the minimum wage over the last two years have been blamed for many layoffs and businesses closing, especially small businesses. The minimum wage enjoyed double-digit hikes for each of the past two years since May 2017, when President Moon Jae-in was sworn in.

The 2018 minimum wage was hiked 16.4 percent, the sharpest increase in nearly two decades, while this year it went up 10.9 percent.

The government considered minimum wage increases a key to its so-called income-led growth policy over the last three years. But when new jobs started to shrink drastically, it pulled back at least rhetorically.

During an interview celebrating his second anniversary in office in May, Moon said the minimum wage shouldn’t be raised to meet his own campaign promise of 10,000 won per hour by 2020.

“As president, I also take responsibility for the impact that [my] campaign promise [of sharp increases in the minimum wage] has had on the economy,” Moon said. “[The minimum wage] needs to find an appropriate level that our society and economy could accept.”

There are already doubts that the minimum wage will reach 10,000 won per hour during this administration.

The Korean government recently lowered its growth outlook for this year from between 2.6 to 2.7 percent to between 2.4 and 2.5 percent. Some consider this too optimistic and project Korea’s growth at below 2 percent.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]