[Korea] Economists Favour Freezing Or Lowering Minimum Wage

16 JUN 2020

Two weeks remain until next year’s minimum wage is finalised and 8 out of 10 academics believe the Korean government should either freeze or lower the base pay, Korea JoongAng Daily reports.

The academics responded to a survey by the Korea Economic Research Institute.

The survey took the opinions of 110 business and economic professors teaching at universities in Seoul and the metropolitan area from May 11 to May 29. 82.7 per cent of respondents said the government should freeze or lower next year’s minimum wage.

Korea’s current minimum wage is 8,590 won ($7.22) per hour, the wage is updated annually. Negotiations for next year’s minimum wage began on June 11, with the first plenary meeting at the administrative city of Sejong. Its 27 attendees represented the interests of the public, workers and employers.

Choo Kwang-ho - the institute's director of research coordination - said, “The Environment and Labor Committee in the 21st National Assembly need to support labour policies that can help companies adapt to a rapidly changing economy, by easing labour regulations and expanding flexible working hours."

Over half of survey respondents said the government should redirect its policy focus from employment stability and turn towards job creation. 32.4 per cent said the government should increase its capacity to create jobs in the private sector, while 28.2 per cent of respondent emphasised improving flexibility in the labour market. 

When asked to compare the labour flexibility of four countries - Korea, the US, China and Japan - the US was considered to have the most flexible labour market. Korea was ranked third of the four in terms of labour flexibility. China came last.

When asked for their reasoning, respondents highlighted the “wage system based on performance and job types” as a key factor in keeping the US labour market competitive. For the Japanese labour market, respondents noted the “acceptance to different types of labour contracts” as a strength. The survey results noted China’s “relatively easy layoffs and flexible hiring practices,” as something to potentially to give the Chinese market a competitive edge over Korea.

Over 70 per cent of respondents agreed that Korea should apply a performance-based wage system, flexible working hours and different minimum wages based on region and job type.

Additionally, survey respondents advised lawmakers on the Environment and Labor Committee to value “consistency and predictability” when carrying out labour policies. Suggested areas of improvement included increased communication between labourers and employers, establishing laws and regulations that meet global standards and having realistic and applicable labour policies.

Choo said, “Not only do companies need to overcome external uncertainties from the coronavirus pandemic, but they also have to prepare for the post-COVID-19 era, in which digitization and automation will become the norm.”

Source: Korea JoongAng Daily