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Restaurants under gov’t watch

After minimum wage increase, concerns about price hikes
Jan 12,2018

The government said Thursday that it would begin monitoring the food services industry for any unusual spikes in consumer prices resulting from a minimum wage increase that took effect at the start of the year.

The announcement came as authorities detected buzz among restaurant owners to raise prices in order to cover the increased labor costs, which the government sees as unjustified.

“There has been a movement among some restaurant business owners to raise prices in the name of offsetting increased costs from [a higher] minimum wage,” Koh Hyung-kwon, first vice minister at the Ministry of Strategy and Finance, said during a meeting at the central government complex in Seoul.

Koh said the government “felt the need to pre-emptively address the matter” with the special monitoring.

Last year, President Moon Jae-in’s administration approved the largest minimum wage increase in nearly two decades, a hike of 16.4 percent to 7,530 won an hour. The increase is part of Moon’s campaign promise to raise the minimum wage to 10,000 won ($9.30) by 2020.

After the higher minimum wage took effect at the start of the new year, businesses decried the move, threatening to pass the costs onto consumers. The government retorted in a statement that a minimum wage increase of 16.6 percent in 2000 and 12.3 percent in 2007 produced little impact on consumer prices.

Businesses have also complained that a higher minimum wage will shrink the labor force because it increases the cost of hiring more people and will affect their bottom line.

In response, the government said it would provide a subsidy of 130,000 won per month to every worker in businesses that employ fewer than 30 workers. Only businesses that pay up to 1.9 million won a month to workers are eligible for the subsidy.

The government’s monitoring of the food services industry and defense of the minimum wage increase echoes remarks that President Moon made a day before at a news conference in which he said an increased minimum wage would “be the foundation of income-led growth” that will secure “quality of life for low-income workers” and increase household income.

Asked about potential pitfalls from increased labor costs such as layoffs, the president said that higher wages would contribute to increasing the number of jobs and expanding the economy in the long run, citing past cases from 2000 and 2007 when wages increased by double digits but did not hamper business activity.


BY KANG JIN-KYU [kang.jinkyu@joongang.co.kr]