Real and idealSome side effects from a sudden spike in the minimum wage have begun to surface. The move, as a part of the government agenda to increase wages for low-income workers, ended up aggravating their conditions by depriving them of jobs. According to job data released by Korea Statistics, as many as 50,000 precarious jobs in apartment security, building cleaning and restaurant service were lost in October. Merchants and mom-and-pop shop owners have chosen to shed part-time and full-time staff or reduce hiring ahead of next year’s 16.4 percent jump in legal hourly pay.
So what can be done to lessen the damage? The minimum wage system must be adjusted realistically. It would be better for employers to choose to offer on-off bonuses, salary in kind or welfare benefits if they cannot afford to increase paychecks. Social benefits are usually paid out to unionized employees of large companies and salaries in kind to foreign workers who need accommodations in Korea.
It is unreasonable to apply the same universal wage hike without regard to the living cost according to the workplace locations and type of work. Of salaried workers, 13.6 percent were paid less than then-minimum wage of 6,030 won ($5.50) an hour in 2016. About 46.2 percent in farming and fisheries sector, 35.5 percent in the hospitality industry, and 24.7 percent in other services sector had been underpaid. The wage hike should be applied differently by taking account of the line of work and location.
Raising the wage base cannot be a solution to poverty. More and more women are working part-time. A study by the Korea Development Institute showed that of workers who were paid less than the minimum wage, 30.5 percent were poor, earning less than half the middle-income bracket in 2013. The larger 69.5 percent belonged to the middle or higher-income bracket as a family. The government’s good intention could end up benefiting the better-off than the poor. The government also must study the ramifications from hikes in minimum wage on the earned income tax credit.
But the government can retrain its redundant workforce and help them locate better jobs. This is why the government increased unemployment subsidies and retraining programs next year. Trying to make amends through public finance out of fear is a foolish and dangerous move. Former President Kim Dae-jung said policymakers should have a scholarly approach to problems and businessman-like sensitivity. A policy must be realistic in order to achieve anything. The minimum wage should also be a mix of realism and idealism.
JoongAng Ilbo, Nov. 18, Page 26