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The subsidy must end

Nov 11,2017
The government announced it will take out nearly 3 trillion won ($2.7 billion) from the fiscal account to subsidize merchants and small-scale enterprise employers for their increased payroll burden from a 16.4 percent hike in minimum wage next year. The 2.97 trillion won, or 130,000 won monthly per worker, will go to help employers of less than 30 workers. Under President Moon Jae-in’s campaign pledge to raise legal hourly wage to 10,000 won over the next five years, the wage floor would go up to 7,530 won per hour, or 1.57 million won per month, next year.

The government and ruling party came up with the subsidy program as income of the lowest bracket declined for five quarters in a row, deepening wealth disparities. The aid program is possible if the legislature approves the government’s budgetary spending plan for next year. The government has been rash in releasing the outline before trying to persuade the opposition, which has been critical of the dramatic spike in the minimum wage.

Increased the minimum wage would boost people’s income and eventually their spending. Low-income workers will also have more to invest, helping to push the country’s long-term growth.

Moon Sung-hyun, chairman of the tripartite committee of labor, management and government, said at a seminar that the government’s policy direction of raising the wage base and converting irregular workers to permanent status was right, but advised that the pace be incremental, in line with the affordability of small and mid-size employers.

The government may have thought it was necessary to help smaller employers to cushion the immediate shock, but no other government in the world is paying for labor in the private sector on behalf of the employer. If the government goes on financing labor, zombie companies which rely on government handouts will never go away.

The government claimed that the aid program will be a one-time deal. But it said it would come up with additional measures in the second half of the year. The government should not extend the aid program. If it continues, the fiscal costs will reach 28.5 trillion won over the next five years. Compensating for hikes in wages with taxes must stop in the next year.

JoongAng Ilbo, Nov. 11, Page 34