Minimum disruption

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Minimum disruption

The Minimum Wage Commission failed to reach consensus on next year’s minimum wage terms by Thursday, the legal deadline. The 27-member committee consisting of nine representatives each from the public sector, private sector employers and labor unions could not decide on a minimum wage figure during a weeklong debate because representatives from the corporate side walked out in protest of the board’s decision not to differentiate wages according to a company’s size, location or type of business. The business community — both small and big — has been campaigning strongly for differentiated rates in consideration of the difficulties businesses have faced following the steep rises in the minimum wage over the last two years.

The harm to the economy caused by a 29 percent hike in the minimum wage over the last two years is evident from the data — and the sight of empty shops and buildings across the country. Labor unions and employer representatives must do all they can to lessen the damages.

Even the ruling party has been calling for pauses in the increases. The minimum wage went up 16.4 percent last year and another 10.9 percent this year to reach 8,350 won ($7.21) under the government’s promise to boost the hourly minimum wage to 10,000 won. When counting in allowances for weekends and holidays, an employer would have to pay more than 2 million won a month. Business has been poor due to sluggish domestic demand and an economy growing under 3 percent for the past few years, making it harder for shopkeepers, merchants and small-sized enterprises to keep up with the steep hikes in labor costs. As many as 43 percent of the hires at lodging and restaurant businesses and 36 percent of workers at worksites employing fewer than five people have been paid below the minimum wage.
The business community has been proposing a sensible solution to differentiate minimum wages according to business size and performance. Farming is the hardest-hit sector. It is common to set a different hourly wage in the farming sector in other countries due to volatility of climate and other conditions. Japan deducts payments to trainees new to a skill for a certain period. Countries like the United States, Russia, Brazil and Mexico allow different minimum wages. Each U.S. state sets its own rate around the base rate of $7.25 per hour. Counting lodging subsidies or bonuses as part of a wage could be an idea to ease the burden on employers. Authorities must show reason and examine all the reference cases to reach the best possible solution.

JoongAng Ilbo, June 28, Page 30
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