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KEF slams Moon’s minimum wage increase

Nov 24,2017
Controversy over the raising of Korea’s minimum wage continues with the leading business lobbying group arguing that the current system benefits already highly paid conglomerate employees rather than people who live on a minimum wage.

“Our country continues to maintain an irrational system in which many guaranteed payments such as regular bonuses are not included when setting the basic wage,” said Kim Young-bae, vice chairman of the Korea Employers Federation (KEF), during a forum at the Westin Chosun Hotel in central Seoul on Thursday. “The purpose of the minimum wage system is to guarantee minimum livelihoods of employees living on low wages but [the current system] has the potential to only benefit highly-paid employees working at conglomerates.”

The business community argues that an employee’s basic wage should include regular payments such as bonuses and allowances for lodging, food and transportation costs.

For example, an assembly line worker for a conglomerate might make 18 million won ($16,560) per year in his basic wage if it only includes his per-hour wage. That doesn’t include an additional 21 million won he actually makes each year in bonuses and other regular payments.

Last July, the government announced that next year the minimum wage would see its sharpest hike in 17 years to 7,530 won per hour, 16.4 percent higher than the current level. The Moon Jae-in government is promising to raise the figure to 10,000 won per hour by 2020.

The assembly line worker works 243 hours a month. With the new minimum wage, he should get annual basic pay of 22 million won. If the basic pay is defined narrowly, he will require a raise. His bonus and allowances are based on the basic pay, so total pay will rise to as much as 43 million won per year from the current 39 million won.

“Payments that are regularly paid to employees such as regular bonuses and housing and food expenses should be included in the basic wage,” Kim said. “We will express the concerns of the business community to the National Assembly so this problem can be resolved.”

Countries such as the United Kingdom, Canada and Belgium include regular bonuses in their basic wage.

The criticism by the KEF Vice Chairman was the strongest since the Blue House warned the business lobby group about its complaints about the Moon Jae-in economic policies. On May 26, Kim criticized the administration’s plan to expand hiring in the public sector, calling it a temporary measure that wasted taxpayer’s money. Kim said the government’s job plan would not solve any fundamental problem.

“The center of debate isn’t regular or contract workers but the wage gap between conglomerate employees and those working at SMEs,” Kim said during a KEF forum in May.

President Moon fired back by saying the KEF was the main contributor to the wealth gap in Korea by encouraging cheap contract work, and advised it to reflect on its past mistakes before criticizing the government.

BY LEE HO-JEONG, LEE SO-AH [lee.hojeong@joongang.co.kr]