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A rush to kill SMEs

June 13,2017
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In November 2012, Alterique Hall, who made $8 an hour at a McDonald’s in New York, joined a one-day strike to raise the hourly wage to $15. It was at the height of the Occupy Wall Street movement, but many laughed at a $15 minimum wage and thought it was so far removed from reality.

After intense discussions over three and half years, the calls to increase the minimum wage started to be reflected in policies. In March 2016, California Gov. Jerry Brown announced that the state legislature agreed to raise the minimum wage to $15 an hour by 2022. The next day, New York Gov. Andrew Cuomo and the New York state legislature made a deal to raise the minimum wage in New York City to $15 an hour by 2018. There is a plan to expand the increased wage level to the city suburbs in 2021.

While other states are likely to follow New York and California, the federal government’s minimum wage guideline hasn’t changed from $7.25 since July 2009. The Barack Obama administration tried to raise it to $10.10 per hour but couldn’t pass it due to the Republican Party’s opposition.

The debate over the positive impact of a higher minimum wage on the living standards of the low-income earners and overall market demand is still in progress in the United States. Therefore, the uniform increase of minimum wage or a drastic increase is not yet fully embraced. The minimum wage varies by region. In Wyoming, where agriculture is the main industry, the minimum wage is $5.15, while it is $11 in New York.

Notable changes began after New York increased the minimum wage from $8 to $11. Major retailers added self-checkout stations and robots taking orders using AI. These measures are directly related to reducing the workforce. Small businesses and retailers cannot make the same moves and had to reduce the number of workers. Some predict that jobs for unskilled laborers will decrease by 5 to 10 percent when the minimum wage goes up to $15.

The calls to raise the minimum wage to living level are also spreading in Korea. Considering the support for President Moon Jae-in’s administration, it is not easy to go against the ambitious plan of the new government to raise the minimum wage to 10,000 won by 2020.
It is worthy to cite the example of the United States, where the minimum wage increase is being implemented carefully and gradually. President Moon promised to make a paradise for small and medium-sized businesses, but a sudden change may lead to unexpected side effects like hurting small businesses and eliminating jobs.

JoongAng Ilbo, June 12, Page 29

*The author is New York correspondent for the JoongAng Ilbo.

SHIM JAE-WOO