Anyone surprised by this? I hope not because it is simple math that employers would cut back on employees if labor costs became too expensive due to forced minimum wage increases. This is especially true for all the mom and pop shops you see in South Korea:
The steep increase in the minimum wage caused 42,000 full-time jobs in convenience stores to disappear in 2018 as they were unable to pay the increased salaries, the Korea Association of Convenience Store Industry said Tuesday.
According to the association, the average number of jobs available per convenience store plummeted to five, down from 5.8 in 2017. The number of full-time staff who worked more than three to four days per week and received monthly wages fell from 2.3 to 1.1.
You can read more at the link, but young people in South Korea are already having a hard time finding a job and now even a convenience store job is harder to get.
What this will lead to is small business owners hiring foreigners instead of Koreans that will ultimately create higher unemployment:
Representatives of employers, workers and the government attend the public hearing on next year’s minimum wage in Gwangju, South Jeolla Province, Monday. Yonhap
Small business owners want the government to introduce a lower minimum wage for foreign workers in Korea.
At Monday’s public hearing on next year’s minimum wage in Gwangju, South Jeolla Province, representatives of employers said “steep” minimum wage hikes over the past two years have pushed many small businesses to the edge and that the government should help them by adopting a “different” wage system for foreign workers.
Song Young-soo, a small business owner in Gwangju, was among participants who reportedlyvoiced the need for a lower minimum wage for foreign employees, who they say show lower labor productivity than Korean workers mainly because of communication problems.
According to a Korea Federation of Small and Medium Business survey early this year, the productivity of an average foreign worker (E-9 visa holder) was 87.5 percent of a Korean worker.
This was never going to go well and it seems President Moon has finally realized this:
Anchor: President Moon Jae-in has acknowledged problems of his key economic policies, calling for ways to break the shock of minimum wage hikes and reduced work hours. This comes as the government forecasts the economy will be sluggish next year as well. Kim In-kyung has the details.
Report: The government has decided to revise the minimum wage decision-making system by February and implement it from 2020, adjusting its pace of increase. It will also spend a record-high 61 percent of its budget in the first half of the year in 2019.
This news is about as surprising as North Korea maintaining missile bases:
Small and mid-sized companies are laying off workers ahead of another 10.9-percent hike in the minimum wage in January to stay afloat.
According to the Korea Employment Information Service, a total of 497,314 workers were laid off by small and mid-sized companies and applied for unemployment support in the third quarter of this year, up a whopping 37,710 compared to the same period of 2017.
This was the biggest rate of increase for the third quarter since the government started tallying statistics in 2010. Over the same period, 110,000 workers were laid off by big businesses, up 14 percent. That means the government has handed out W5.5 trillion in unemployment support in the first 10 months of this year, already surpassing last year’s total of W5.02 trillion (US$1=W1,130). [Chosun Ilbo]
Angry self-employed businessmen from across the country call for the government to revoke the recent sharp increase of the minimum wage during a rally amid heavy rains at Gwanghwamun Square in downtown Seoul on Aug. 29, 2018. Many self-employed persons gave up their businesses in the wake of the hike. (Yonhap)
It looks like reality has set in for the Moon administration’s attempt to raise the minimum wage even further in South Korea:
Moon Jae-in
President Moon Jae-in admitted Monday he won’t fulfill his campaign pledge to raise the minimum wage to 10,000 won ($8.86) by 2020, after anguished protests about rising labor costs from small business owners and concerns voiced by at least one top member of his administration.
“As a result of the decision by the Minimum Wage Commission, it became difficult to achieve the target of raising the minimum wage to 10,000 won by 2020,” Moon said during a meeting with his senior secretaries at the Blue House on Monday. “I offer my apologies for being unable to keep my pledge.”
The president added that he respects the decision by the commission to keep next year’s minimum wage hike lower than expected and said the government will do its best to realize a 10,000 won minimum wage as early as possible.
Moon’s five-year term ends in May 2022. Moon expressed his appreciation to the commission for raising next year’s minimum wage by more than 10 percent. [Joong Ang Ilbo]
I think these mom and pop stores have a valid complaint because big businesses can respond to the wage increase by cutting jobs or hours and then automating where necessary. Mom and pop stores may not have the capital available to automate like a bigger business:
Owners of mom-and-pop stores on Friday called on the government to freeze the minimum wage in 2019, claiming rising labor costs will seriously impact their profitability.
If the government moves to raise the minimum hourly wage from the current 7,530 won, the Korea Federation of Micro Enterprise (KFME) won’t accept it, a KFME official said.
The Minimum Wage Commission is required to set the guidelines for next year’s minimum wage level by Saturday. Representatives for labor are demanding a 43 percent increase in the wage to 10,790 won, but small businesses have made it clear that such a step is unacceptable.
Mom-and-pop stores and other modestly sized firms account for 86 percent of the country’s enterprises and hire 36 percent of its total workforce, according to Statistics Korea.
The country’s minimum wage shot up this year, and the Moon Jae-in government is pushing to raise the hourly base to 10,000 won within three years to achieve “income-led growth.”
But local businesses are lukewarm to the idea. There has been a move to let go of workers due to rising costs, with people in their 20s and 30s facing greater difficulties landing jobs. [Yonhap]
Thousands of members of the Korean Confederation of Trade Unions (KCTU) stage a rally at Gwanghwamun Plaza in downtown Seoul on June 30, 2017, demanding the government raise the minimum wage and employ all nonregular workers as regular employees. (Yonhap)
I think when determining if a minimum wage is too high or too low it depends on if the minimum wage is supposed to be something that people are supposed to make a living off of. If the minimum wage is supposed to be livable wage then the increase is probably not enough considering the high cost of living in a place like Seoul:
Members of a labor union for part-time workers protest for a higher minimum wage in Seoul last month. (Yonhap News)
Four subway rides, a newspaper and packet of cigarettes, or one Big Mac: That is what a minimum-wage worker can buy after an hour on the job, and have change of a couple of hundred won. The minimum hourly rate of 4,860 won, due to rise to 5,210 next year, amounts to 1.08 million won a month for a 40-hour work week. Differences in purchasing power make comparison between countries difficult, but the nation’s rate ranks on the low end of the scale among wealthy nations. In 2011, just eight of the 23 OECD countries aside from Korea had a lower hourly minimum. Many of those countries with higher rates, however, also have significantly higher GDPs per capita. Nonetheless, whether the current wage is reasonable depends very much on who you ask. Neither employers nor labor groups expressed satisfaction with the most recent increase for 2014, the former having called for an outright freeze, the latter a rise of more than 21 percent.
“It is very hard to pin down whether the minimum wage is high or low. It is somewhat relative,” Woo Seok-jin, an economics professor at Myongji University in Seoul, told The Korea Herald. “We have some minimum living standard costs, and the minimum wage should be determined based on that level.”
Whether the current rate meets such a standard is a matter of debate. Park Jeong-woo, a 20-year-old music student at Seoul National University of Arts, has worked numerous minimum wage jobs such as a convenience store clerk alongside his studies. Even though he avoids rent by living with his parents, he still finds the current rate to be out of synch with the rising cost of living. [Korea Herald]
If US fast food workers think they have it bad with the US minimum at $7.25 an hour look at what their counterparts in Korea get paid:
The government announced on Friday the newly raised hourly minimum wage for next year.
According to the Ministry of Employment and Labor, the government will raise the hourly minimum wage by 7.3 percent from 6,030 won ($5.43) this year to 6,470 won starting at the beginning of next year.
“We accepted formal objections starting from July 21 to Monday, and we didn’t receive any from the labor representatives,” said Kwon Chang-joon, a director at the ministry. “We did receive a petition from the Korean Federation of Micro Enterprise but decided that there is no need for further consideration after reviewing various laws and decision-making processes by the Minimum Wage Commission with labor and business sectors.” [Joong Ang Ilbo]
