The wage hike’s damageThe double-digit hike in the minimum wage over the last two years has hurt jobs and income distribution, according to Dongguk University economics Prof. Kim Nak-nyeon. His study based on job numbers from Statistics Korea showed the 29.1-percent surge in the hourly wage had broad effects on jobs, work hours, and income distribution. The findings were released at the spring seminar of the Society of Korean Economics History.
Income distribution across the nation showed that jobs decreased more in regions that were affected more heavily by the minimum wage hikes. Statistically, a 1-percent rise in the minimum wage decreased jobs by 10,000. That means the 16.4-percent spike in the minimum wage last year wiped out 160,000 jobs. That also explains why new jobs stopped at 100,000 monthly last year, compared with the average of 300,000 in the previous years.
The low-income groups’ unemployment problem has led to a worsening of the income distribution. The income of the bottom class decreased at a steeper rate than other classes because of their job losses. Regardless of the good intentions of the policy, the surge in the minimum wage has killed jobs and worsened income distribution.
A survey by the Korea Labor and Employment Relations Association showed similar findings. Jobs and work hours were reduced at a majority of small businesses in the survey on the wholesale, retail, lodging and restaurant categories. The government must act quickly.
It must recruit neutral public members for the Minimum Wage Commission later this month and moderate the pace of the minimum wage increase before more harm is done on our economy. Korea has 1.25 million unemployed, the highest number in 20 years. This is a crisis.
JoongAng Ilbo, May 22, Page 30