Choo Kyung-ho: "High Wage Increases Cause Inflation and Conflicts... Please Refrain"

Held a Meeting with Business Leaders at the Korea Employers Federation
"Request to Absorb Cost Increases through Investment Expansion"

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho (right) and Sohn Kyung-shik, Chairman of the Korea Employers Federation, are walking to the meeting room at the Federation of Korean Industries building in Mapo-gu on the 28th.
[Image source=Yonhap News]

[Asia Economy Reporter Kiho Sung] Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho met with business leaders and requested them to refrain from excessive wage increases that could exacerbate inflationary pressures.

On the 28th, Deputy Prime Minister Choo met with business leaders including Sohn Kyung-shik, Chairman of the Korea Employers Federation (KEF), at the KEF conference room in Mapo-gu, Seoul, stating, "Recently, there has been a concerning trend of high wage increases centered on some information technology (IT) companies and large corporations, showing signs of spreading to other industries and companies." This meeting was organized for business leaders to convey difficulties from the field and was the first large-scale business meeting since Deputy Prime Minister Choo took office.

He pointed out, "So-called 'successful,' 'capable,' and 'large top-tier companies' are competitively leading high wage increases under the pretext of performance rewards or talent acquisition," adding, "Excessive wage increases not only worsen the high inflation situation but also widen the wage gap between large corporations and small and medium-sized enterprises (SMEs), increasing the relative deprivation of SMEs and vulnerable workers."

Deputy Prime Minister Choo said, "Excessive wage increases beyond the productivity of large corporations will expand polarization in the labor market and deepen job mismatches across workplaces," and noted, "It is also difficult for companies to maintain competitiveness under such a high-wage, high-cost structure."

He continued, "The government prioritizes stabilizing living costs as the top economic policy task and is mobilizing all available policy tools to respond, but there are limits to government efforts alone," emphasizing, "(Price stabilization) requires cooperation and joint efforts from the government, business leaders, labor, and the public to overcome."

He added, "Especially if companies competitively raise prices and wages riding the inflationary trend, it will cause a vicious cycle of price and wage increases, leading to difficulties for the entire economy and society and benefiting no one," urging, "I earnestly ask companies to absorb price increase factors as much as possible through productivity improvements and cost reduction efforts."

Business leaders requested the government to implement ▲ regulatory reforms ▲ labor reforms ▲ tax system improvements. In particular, regarding labor reforms, they argued for lifting restrictions on dispatch work currently limited to 32 industries and extending the contract period limit for fixed-term contracts from 2 years to 4 years. Regarding tax improvements, they asked for lowering the highest inheritance tax rate to the level of OECD advanced countries and preparing tax support measures related to corporate tax systems.

Sohn Kyung-shik, Chairman of KEF, said, "Recent sluggishness in real economy indicators such as consumption and investment continues, and there are growing concerns that our economic growth rate this year will remain in the mid-2% range," adding, "I once again ask for swift removal of laws, systems, and regulations that are unfavorable compared to competing countries or hinder corporate vitality to foster business leaders' willingness to engage in business."

Meanwhile, 27 KEF chairpersons attended the meeting, including Sohn Kyung-shik, KEF Chairman and CJ Chairman; Lee In-yong, President of Samsung Electronics; Lee Hyung-hee, SV Chairman of SK Supex Council; Jung Sang-bin, Vice President of Hyundai Motor Company; Ha Beom-jong, President of LG; and Song Yong-duk, Vice Chairman of Lotte Holdings.

This content was produced with the assistance of AI translation services.