Wage hike is best for economy
After a new rule required chief executives and other registered corporate board members who earn more than 500 million won ($490,000) a year to disclose their annual salary, SK Group Chairman Chey Tae-won topped the list with a paycheck of 30.1 billion won, followed by Hyundai Motor Group Chairman Chung Mong-koo with 14 billion won in 2013. At the country’s 100 largest companies, 197 executives averaged 1.66 billion won per person. Some well-known business owners such as Lee Kun-hee, chairman of Samsung Electronics, and his son and vice chairman, Lee Jae-yong, were exempt because they are not legal directors. Based on the data, one executive’s pay is equal to the combined earnings of 127 Korean workers that are paid the 5,210 won per hour minimum wage. In 2013, an executive’s paycheck was 54 times bigger than the 2.58 million won average salary workers earned in a workplace with more than five people. On one side of society, a person leads a luxurious life and is rewarded for unspecified work. On the other, part-time workers have to provide for their families through difficult times. South Korea’s income disparity is widening.
Of the 18.24 million workers in Korea, 4.5 million, or 25 percent, are low-income earners. Non-permanent workers make up 46 percent of the work force, or 38.6 million people, against permanent workers who total 640,000, or 6.5 percent. One out of 16 employees on the permanent payroll and one out of two working on an irregular basis are underpaid. According to the Organization for Economic Cooperation and Development, the share of workers making meager pay for their work made up 25.1 percent as of 2011, sharing the top spot with the United States. The International Labor Organization in its 2010 global wage report singled out South Korea for having the worst pay disparity out of the 17 member countries with a low-income rate of more than 25.6 percent of the working population.
Despite such dire conditions, employers have demanded a freeze in wages for the last four years during annual minimum wage meetings. The government-appointed mediator remained mostly silent without recommending new guidelines, raising suspicion about which side he was on. The increases were insubstantial, doing little to improve lives when the inflation rate was taken into consideration. Minimum wages are defined in the Constitution as the lowest hourly, daily or monthly remunerations employers legally must give their workers. But the base somehow became the salary ceiling for employers to pay their low-level employees, worsening their living standards. The money hardly covers living costs for a family. The country’s legal minimum wage is the 20th lowest among 27 OECD members and after it is adjusted for the cost of living, hourly minimum wage comes to $5.20, the lowest among comparable economies.
Employers argue that they cannot raise the income base because of economic conditions. The conservative government and economists all say that recovering domestic demand is crucial to accelerate growth. What can stimulate domestic consumption is increased household income. Workers must be paid more for not just the individual’s sake but for the economy’s. A huge income gap weighs on an economy’s growth. Japanese Prime Minister Shinzo Abe has been encouraging companies to raise salaries for employees to help accelerate economic growth. Hiromasa Yonekura, chairman of Japan’s Business Federation, or Nippon Keidanren, joined him in urging corporate members to raise wages for employees to stimulate the economy.
Consumption remains in the dumps because workers are underpaid. A long-term slowdown is inevitable unless income levels allow consumers to spend. The best way to encourage consumer spending and revitalize domestic demand is to increase the minimum wage. In a country like Korea where there is no social safety net, wages are the only security for low-income earners. Wages must be rationalized in order to improve living conditions for low-income workers, guarantee the least social security and help ease income disparity. In the end, it will translate into stable economic growth.
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, May 30, Page 26
*The author is general secretary of the Federation of Korean Trade Unions.
By Lee Byung-kun