Minimum wage rise could spark up to ‘470,000 job losses’

Labor representatives of the Minimum Wage Council storm out of a wage-setting meeting held at the government complex in Sejong on Tuesday after claiming the government is oppressing laborers. [NEWS1]

With umbrella unions refusing to have further wage-setting talks Tuesday after demanding a 26.9 percent rise in next year’s minimum wage, a major business lobby group has argued that such an increase could result in 470,000 job losses.

Between 28,000 and 69,000 jobs may be lost if the minimum wage rises above 10,000 won ($7.65) per hour, up 3.95 percent from the current 9,620 won, according to research from the Federation of Korean Industries (FKI) on Monday.

The research was carried out by Choi Nam-suk, an economics professor at Jeonbuk National University, who estimated the change in job numbers by calculating the job elasticity and the percentage of increase in the minimum hourly wage.

The labor representatives of the Minimum Wage Commission (MWC) demanded next year’s floor wage rise to 12,210 won per hour at the government complex in Sejong on Thursday.

Between 194,000 and 470,000 people will lose their jobs if the minimum wage rises in line with the labor side’s demands, according to FKI.

This is more than the average number of new jobs created each year — 314,000 — over the past five years.

The hike will land a harsh blow on young Koreans and low-income households, the report said.

If the minimum wage climbs above the 10,000-won threshold, up to 18,000 people between 15 to 29 years of age will lose their jobs, which may rise to 125,000 if the 26.9-percent spike is implemented.

Households in the bottom quintile of the income bracket will lose 29,000 and 247,000 jobs, respectively.

The increased minimum wage could see the service and construction sectors lay off a considerable number of workers, the economics professor said in the report. Up to 16,000 jobs in the service sector and 26,000 jobs in construction will be cut under a 10,000-won-per-hour minimum pay.

“A rise in the minimum wage will impose a heavier burden on small businesses that are already experiencing financial challenges [...] amid an economic slowdown,” Choi said.

The MWC, a trilateral committee composed of representatives from labor, management and the public, announces new minimum wages by August 5 every year. Minimum wages are finalized at a middle ground between the demands of labor and management.

The most recent MWC session held on Tuesday ended after a few minutes when labor representatives stormed out after blasting the Labor Ministry for not approving a new labor representative nominated by them in their opening remarks.

Management representatives have yet to make their wage announcement but are widely expected to demand a freeze.

Korea Enterprises Federation (KEF), another business lobby group, released a statement Sunday calling on MWC to keep the minimum wage steady.

More than 10 percent of paid workers this year are not being paid the minimum wage, KEF claimed.

“Korea’s minimum wage grew 41.6 percent from 2018 to last year but labor productivity has upped by only 0.2 percent,” KEF Vice Chairman Lee Dong-Keun said, pointing out there is no need for another increase.

BY PARK HAE-LEE, SOHN DONG-JOO [sohn.dongjoo@joongang.co.kr]