The South Korean government has commissioned an industry-wide study on the impact of the hike in minimum wage and cutback in work hours, stoking expectations that it may be paying heed to calls from experts and businesses to moderate the pace in its wage-led growth policy given the ramifications on the fragile economy.
Korea Institute for Industrial Economics & Trade (KIET) and Korea Labor Institute (KLI) have been assigned by the prime minister’s office to investigate the effects of the latest minimum wage hike and reduced workweek on manufacturing and service sectors with an aim to devise a more tailored policy, according to government officials on Thursday.
KIET would pull together information about the adverse effects of the wage increase and come up with areas for improvement, while KLI would analyze the changes in employment and working environment. A labor ministry official said the study would provide the much-needed evidence to fine-tune the policy.
Increasing the minimum wage has been the cornerstone to left-leaning President Moon Jae-in’s “income-led growth” campaign, which aims to spur domestic consumption by boosting income. With a goal of raising the minimum wage to 10,000 won ($8.90) by 2020, the government raised the hourly minimum wage by 16.4 percent to 7,530 won earlier this year, the biggest jump in nearly two decades. Another 10.9 percent hike is expected for 2019, bringing the wage to 8,350 won.
The rapid pace of the hikes has been met with fierce opposition from the business sector, especially from small businesses that cannot afford the higher new wages. Employers have complained they are forced to lay off staff or cut working hours to make ends meet. Their burden was compounded in July when the government reduced the maximum workweek to 52 hours from 68 hours.
Pressure to shift policy course has been mounting as Korea’s labor market has slumped to its worst since the global financial crisis. The country added just 5,000 jobs in July and 3,000 jobs in August, compared to monthly average gains of 300,000 last year.
Worsening economic conditions have further eroded support for the president, with Moon’s approval ratings dropping for the fifth week in a row to 55.6 percent, according to the latest survey by Realmeter.
By Chung Seok-woo and Kim Hyo-jin
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]