Time to end this nightmareThe government should not send mixed signals to businesses, people and the market on good economic governance. Companies will be confused if they cannot understand the government’s true intentions.
The government is having trouble making up its mind about the minimum wage — the source of the economy’s struggles, but also a keystone of the Moon Jae-in administration’s income-led growth policy. Finally paying heed to public criticism, President Moon asked the Ministry of Employment and Labor to study all the harm caused by the drastic increases in the minimum wage. Since he took office, the minimum wage will have gone up 29 percent from 2016 after the second double-digit hike next month.
The damages are obvious even without extra study. Around 6.9 million small business owners have been affected by the sharp increase in wages, while part-time or contract workers are increasingly losing their jobs. Over 1 million small business owners are projected to have closed their businesses by the end of the year. Nine out of every 10 small businesses that opened are expected to have gone under. Yet the government last week proposed to revise the minimum wage act to force companies to count all paid holidays in wages. The payroll will inevitably go up for most Korean companies, where allowances take up a large share of workers’ monthly salaries.
Under the new outline of the minimum wage, salaried workers earning 50 million won ($44,464) a year will receive the minimum wage. Seventeen business organizations — big and small — all protested the revision. The government pushed the revised minimum wage even as the president suggested moderating the policy. Deputy Prime Minister for the Economy and Finance Hong Nam-ki held a meeting over the weekend to examine the issue before the revision will be finally endorsed in a cabinet meeting on Dec. 31.
The president and government must work in sync. The president recently said the government should examine whether it has listened to the voices of industry. The government must stop its reckless policy drive if most economic organizations oppose the move. Dilly-dallying out of fear of unions cannot turn business sentiment around. Enterprises and markets deplore uncertainties. The damage caused by the minimum wage will not end unless the authorities send a clear message to the market.
JoongAng Ilbo, Dec. 24, Page 34