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Fix the minimum wage

June 20,2019
Hyundai Motor Co. could be penalized for underpaying employees despite its generous 92 million won ($78,000) average annual compensation. The Korean automaker pays more than BMW and Toyota, but is categorized as underpaying its employees. Under Korean law, the hourly minimum wage base discounts various incentives and bonuses, although they make up a substantial share in wages at Korean companies. Under the current system, 7,200 employees receiving around 50 million won a year are paid below the minimum wage based on their base salary.

But the problem can simply be solved by breaking down bonuses paid out every other month or six months a year to monthly paycheck payouts, as the court has recognized regular bonuses a part of base wage. But the trouble is that the union refuses to agree to the change. Without union agreement, Hyundai Motor must raise base salaries or the employer faces three years in prison or a maximum fine of 20 million won beginning in July due to the expiration of the grace period.

The hassle is the result of the 29.1-percent increase in the minimum wage over the last two years. Large companies could weather it out, but small- and medium-sized workplaces that are responsible for more than 80 percent of the employed might not. Fifteen groups representing SMEs on Monday held a joint press briefing pleading for a freeze in the minimum wage.

Grocery chains and other brick-and-mortar retailers already struggling in the face of a surge by online shopping malls saw their operating profit halved from a year ago in the first quarter due to a spike in their labor cost and a business slump. Korea now pays the highest minimum wage against its national income when counting in allowance for weekend and holiday breaks among members of the OECD. About 33 percent of small merchants fret that they would have to close down within a year and 81 percent call for a cut or a freeze in the minimum wage.

Ruling party members began to join the chorus on the minimum wage. Democratic Party (DP) Rep. Hong Young-pyo, who had expressed concerns about employers’ costs when he was a floor leader, raised his voice in calling for a freeze in the minimum wage. Park Young-sun, minister for SMEs and startups, also said she believed the minimum wage should stay at the current level. Business, academic and political circles are in general agreement that the minimum wage hike must pause.

The Minimum Wage Committee must settle next year’s level by June 27. It must reflect the broad needs and stall the accelerator on the wage. The grace period on penalizing companies for violating the minimum wage act should be extended for another six months to lessen the hardship on the business sector. The economy has already paid too much for policy failures and experiments. The side effects have become undeniable. The government, too, must change its position in regard of the business realities.

JoongAng Ilbo, June 19, Page 30