Stubborn on wages

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Stubborn on wages

In an unprecedented economic crisis defined by President Moon Jae-in as a “state of war,” his administration hurriedly created a 40-trillion-won ($33.5 billion) emergency fund to help some struggling conglomerates fight the Covid-19 shocks. Small- and midsized-companies and mom-and-pop-stores across the country face an even tougher battle ahead. The liberal government has rolled up its sleeves to help them stay afloat to the extent that its fiscal deficit has swollen to a whopping 111 trillion won as a result of three supplementary budgets so far this year.  
 
In such grim circumstances, four members of the combative Korean Confederation of Trade Unions (KCTU) — an axis of a tripartite committee established to determine next years’ minimum wage — refused to join an urgent meeting scheduled for Thursday.  
 
Given the gravity of our economic crisis, the direction of next year’s minimum wage is obvious. The Korea Federation of SMEs (K-Biz) urged the tripartite committee to “at least maintain this year’s level” after dramatic hikes of 32.7 percent over the last three years, because it can “help reduce jobs for the poor.” A recent survey by K-Biz showed that 80.8 percent of its members — 10 percent more than in last year’s survey — wanted a freeze in the minimum wage currently fixed at 8,590 won.  
 
Drastic increases in the minimum wage have caused serious side effects on employment and income redistribution. In an analysis of the minimum wage and hiring last year, Kim Nak-yeon, an economics professor at Dongguk University, confirmed the previous assumption that if the minimum wage rises 1 percent, 10,000 jobs disappear — particularly in such areas as self-owned retail and wholesale businesses, restaurants and lodgings.  
The coronavirus shocks are even worse for struggling SMEs. We see a plethora of news reports that many of them cannot even borrow 10 million won from commercial banks due to their low credit scores. We cannot understand the KCTU’s decision to not participate in the tripartite meeting after stressing the need to ratchet up the minimum wage.  
 
Labor unions have been behaving as if they side with the socially weak. But the reality shows otherwise. If the minimum wage goes up, low-wage earners like part-timers and contractors lose jobs first. In the meantime, members of the powerful unions of large companies in the private and public sectors reap the benefits. The parties involved in determining next year’s minimum wage should readjust the alarming pace of wage increase and allow different wages per industry — accepting the harsh reality of our economy in the coronavirus era. 

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