An irresponsible wage hike

The hourly minimum wage for 2022 has been set at 9,160 won ($8), up 5.1 percent from this year. On Monday, the Minimum Wage Committee reached its conclusion at its ninth full members’ meeting. When considering holiday pay, the real wage goes up to 11,003 won per hour.

Since President Moon Jae-in pledged to raise the hourly wage to 10,000 won in the presidential campaign of 2017, it was increased 16.4 percent in 2018 and 10.9 percent in 2019. The pace of the hikes were moderated in the next two years in the face of strong resistance from small businesses. But next year, the minimum wage will grow by more than five percentage points. Over the last four years, the minimum wage rose by 2,690 won, a whopping 41.6 percentage points. We have vividly seen the bad effects of the rapid wage hikes the government pushed under its income-led growth policy. A countless number of businesses were forced to lay off employees or introduced automated systems, doing away with jobs entirely. In some cases, the businesses even had to shut down forever.

The latest 5.1 percent wage hike will cause serious problems for a plethora of struggling companies, small and big, to stay afloat in an uphill battle against the pandemic. The stifling social distancing rules are pushing small businesses, in particular, to the brink. As a result, the government and ruling Democratic Party (DP) are still holding meetings to find effective ways to give relief grants to people in distress.

However, we are dumbfounded at a comment from a professor, one of the wage committee members. Shortly after fixing next year’s minimum wage, he pointed to the need to prepare for economic recovery next year. How could someone determine a minimum wage based on an uncertain future? How could a doctor prescribe a medicine on the condition of a patient’s recovery? The minimum wage is determined each year. It’s never too late to raise it after the economy recovers next year.

Complaints from mom-and-pop store owners are deafening. A restaurant owner in Seoul lamented that he cannot afford wage hikes anymore. “An increase in the minimum wage regardless of our deepening pain will only trigger more layoffs, loans and close-downs. We should reconsider the universal application of the minimum wage, which ignores any regional or job differences. Simply put, it’s not fair to apply the same wage to convenience stores in Gangnam and remote areas.

A DP lawmaker recently made bombshell remarks. “If a workplace cannot afford to pay the minimum wage, it must shut down,” he said. Wage hikes sound sweet to low-income earners. But if businesses shut down, they have no place to go.