Disputed Effects of Minimum Wage Hike open the window of AOD

Write : 2018-06-10


The Korea Development Institute(KDI) has estimated that the minimum wage hike introduced this year has led to the loss of as many as 84-thousand jobs.
KDI is the first state-run think tank to suggest a possible drop in employment due to the higher minimum wage.
But it said the decline in hiring appears to be minimal for the time being owing to effects from employment stabilization funds of nearly three trillion won provided by the government.
However, the institute has advised the pace of minimum wage hikes should be adjusted as steep increases can disturb the labor market.
It said that if the hourly minimum wage is raised by 15 percent both in 2018 and 2019 for the figure to reach ten-thousand won by 2020, 96-thousand jobs could be lost next year and 144-thousand positions could go the following year.
Controversy over the effects of the minimum wage hike continues to escalate.
The presidential office is refraining from related remarks, while Finance Minister Kim Dong-yeon said that there can be various opinions but it's not desirable for the issue to be shown in a confrontational manner.
A policy director at the top office argued last month that the conclusion so far is there is no decline in employment due to the minimum wage hike with the exception of a few sectors, including the food and beverage industry.
But the finance minister quickly refuted this statement, saying the wage hike would have affected employment and wage levels.
Since then, President Moon Jae-in has hinted that it may be difficult to achieve the goal of increasing the minimum wage to ten-thousand won by 2020, which was his campaign pledge. He said that if conditions are not favorable, this goal may not be achieved.
State-run think tanks are also divided.
The Korea Labor Institute has stressed the positive effects of a higher minimum wage, while the KDI has pointed to side effects.
The Labor Institute has said that income growth for individual workers was higher among the low-income class in this year's first quarter.
Based on this assessment, President Moon remarked that the effects of the government policy on raising the minimum wage and seeking income-led growth are 90 percent positive.
But this remark came under fire for being based on distorted data that excluded workers who lost their jobs since the wage hike.
The KDI has underlined the side effects and the need to adjust the pace of raising the minimum wage.
Such controversy over the minimum wage can even hinder the income-led growth initiative of the Moon administration. Neither the government that justifies the effects of the wage hike nor critics who are concerned of side effects are backing down.

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