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SME group criticizes minimum wage policy

July 05,2018
An association that represents Korea’s small and mid-sized firms on Wednesday called on the government to differentiate the rate of minimum wage increase by industry, citing worsening employment conditions in certain sectors.

The Korea Federation of SMEs on Wednesday held a press conference and criticized the government’s push to further increase the minimum wage next year, despite the negative impact the initial increase has had on the country’s employment, saying that it has failed to consider the unique characteristics of different industries in its policy decision.

“[Applying the same] minimum wage [across all industries] creates numerous structural problems,” said a representative of the federation during the press conference, which took place at the federation’s headquarters in Yeouido, western Seoul. “Given that [the current] system does not take into account the ability of some small business owners to pay wages to their employees, [the government] needs to apply different minimum wages by business.”

The federation’s argument is that the labor costs that a company can afford differ tremendously depending on which industry it is in. Some industries have already taken a blow from the 16.4 percent minimum wage increase this year, forcing them to let go of some employees.

Data by Statistics Korea showed that the restaurant and lodging and retail and wholesale sectors - deemed vulnerable to changes in hourly base wage - shed about 100,000 workers in May this year.

As a whole, the Korean economy only added 72,000 new jobs in May, the fourth straight month that the figure has stayed below the 100,000 mark and the lowest increase in eight years and four months.

The federation also argued that 13 workers out of 100 could not even earn the minimum wage in 2016, meaning some companies couldn’t afford to pay employees the minimum wage when the base salary was far lower than this year.

The minimum wage in 2016 was 6,030 won ($5.40). This year’s minimum wage is 7,530 won.

The percentage of workers paid below the hourly base salary was even higher for food and lodging at 34.4 percent and for wholesale and retail at 18.1 percent, the federation said. Pushing up the minimum wage to as high as 10,000 won, as the government has promised, without considering such factors would only exacerbate the situation, the federation argued.

“The percentage [of workers not getting paid the minimum wage] is already at an unprecedented level,” said Lee Jae-won, chief of the human resources support division at the federation. “Applying different rates for different businesses is necessary in order to increase the effectiveness of the [minimum wage] policy.”

Korean businesses have been requesting that the government vary the legal minimum wage by different sectors for years. The federation made a similar argument last year.

Countries like Japan and Canada have implemented a system where the base salary required by law differs depending on the industry.


BY CHOI HYUNG-JO [choi.hyungjo@joongang.co.kr]