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Questioning the 10,000 won target

Jan 10,2018
The ramifications of the 16.4-percent spike in the minimum wage in the New Year have been bigger and broader than expected. Proponents say that an employer is better off going out of business if it cannot afford to pay employees at a minimum wage of 7,530 won ($7) per hour. But the toll turned out to be harsher. Mom-and-pop stores are struggling to cope with the new wage environment.

The weak were first to be hurt. Employers are laying off their staff and going automated. Some have increased break time to reduce their employees’ hourly work and even cut business hours. If not, the employers are doing the work themselves.

The first to go are part-timers. They are mostly in precarious lines of work such as cleaning, security and parking services. Security has become automated while diners, gas stations, convenience stores and cafes are increasingly becoming self-serve to save on labor costs.

The broader population is baffled by the jump in consumer prices even as their income remains stagnant. Burger prices at fast food chains rose 5 to 6 percent, and other franchise restaurants are raising menu prices as a result of higher labor costs. Prices at beauty salons and car washes have also have gone up. Luxury foreign products, too, have upped their price tags. Even those getting a higher minimum wage will find life as tough as before due to their higher living costs.

But the government turns a blind eye to the downsides of the higher minimum wage promised by President Moon Jae-in. When a merchant complained of inflation in a meeting with Finance Minister Kim Dong-yeon while visiting a food street in Jongno District, central Seoul, he merely recited that the government expects inflation gains will stay at 1.7 percent this year. Due to the discrepancies between policy and reality, the government offices are stumbling in uncoordinated actions. The Fair Trade Commission revised an act on retail contracts to enable suppliers to demand retailers pay higher prices for their supplies as a result of rising raw material costs. But the Finance Ministry says it will be carrying out a crackdown against increases in prices.

The Finance Ministry said it will come up with measures next month against the side effects from the hike in the minimum wage. But it won’t help if it is coming up with makeshift measures such as tax breaks. It must moderate the campaign to raise the minimum wage up to 10,000 won. Even the head of Minimum Wage Commission Eo Soo-bong said the 10,000 won goal needs to be re-examined.

JoongAng Ilbo, Jan. 9, Page 30