Minimum wage ripplesThe Moon Jae-in administration has come up with an attractive title for a government report about its economic performance in the year since the president took office in May 2017: “One year after designing a new economic paradigm! A change in your life begins.”
The government underscored in the report that the quality of life for low-income earners has improved thanks to government-driven hikes in the minimum wage.
The government based its rosy assessment on statistics showing that Korea’s real household incomes started to rebound in the last quarter of 2017 and that a barometer of income distribution has improved after eight quarters thanks to increases in the incomes of low wage earners. The barometer refers to the median income of the highest income quintile divided by the median income of the lowest quintile. The bigger the number, the more unfair a country’s income distribution.
But income data for the first quarter of this year released on Thursday by Statistics Korea shatters the government’s optimistic description of its performance and that of the economy. The barometer of income distribution actually got worse than a year ago as it increased to 5.95 from 5.35. The 5.9 figure is the highest since 2003 when the national statistic office began to collect related data. Despite some increases in overall household incomes, the nominal income of the lowest income bracket fell by 8 percent, while that of the highest income bracket grew by 9.3 percent over the last year. That’s not all: Incomes for the wealthiest 20 percent increased and for the poorest 20 percent decreased by the largest margin in history.
The government claims that it does not yet have meaningful data that can show the positive effects of the minimum wage hike. That’s an excuse. If the household income data for the first quarter just released by Statistics Korea is not a barometer of our wealth distribution after the government’s over-the-top push for the minimum wage increase, what else is?
The public is feeling the shocks from the minimum wage hikes in their daily lives. Just look at the fewer workers in restaurants and convenience stores and longer queues at shops across the country. Deputy Prime Minister of the Economy and Finance Minister Kim Dong-yeon may avoid such shocks, cushioned by flattering briefings by his subordinates, but ordinary citizens are feeling them every day. We hope his argument for a slowdown in raising the minimum wage could offer a good turning point.
JoongAng Ilbo, May 25, page 30