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Time to fix minimum wage

Apr 05,2018
The effectiveness of a public policy cannot be rightfully evaluated for fixes if judged purely in a ideological context. The policy on the minimum wage is in such deadlock. Damages have spilled over, but the government merely tries to cover them with makeshift measures. The government cannot withdraw minimum wage hike as it believes it is the signature to the economic policy championing growth led by increases in income.

The shocks from a steep rise in the minimum wage have been bigger than expected. Economists believe rises in the legal wage floor have positive effect when the job market is in near perfect employment. But when youth unemployment is serious, a higher minimum wage can worsen hiring. Increases in income and jobs are the results of an economic growth and cannot work to generate growth. Progressive economist Lee Jeong-woo, who served as the policy chief for President Roh Moo-hyun, likened jobs to the cart led by the horse (economic growth) to argue that a cart cannot come before a horse.

Other progressive economists also do not agree that the policy meets its progressive goal. According to Cho Joon-mo, a professor at Sungkyunkwan University, when the minimum wage becomes 10,000 won ($9.40), 44.3 percent of Korean workers would be living off the wage base. When counting in overtime, nearly half of the Korean working population would come under the labor force paid with minimum wage. When that happens, the wage level would become a standard for Korean workers, not the minimum. Because the government has set the standard, the economy more or less falls under state control. Some workers are categorized as minimum wage workers although their annual pay exceeds 80 million won. This policy benefits high-income workers would not be the design of the liberal government. A progressive policy should help the poor.

The government, employers and employees have begun negotiating the minimum wage for next year. Before they set the guideline, the National Assembly should define the scope of minimum wage. The union has been placing ads in some newspapers accusing lawmakers of trying to cut minimum wage. But the legislative should not yield to union demands ahead of the June elections.

The rationalization of the minimum wage system could be the litmus test to distinguish between the real and fake on the progressive front.


JoongAng Ilbo, April 4, Page 30