[Reporter’s Notebook] Minimum Wage: No Winners, Only Losers

Despite Seven Years of Sharp Increases, Both Business Owners and Workers Remain Dissatisfied
Measures Needed: Industry-Specific Application, Abolition of Weekly Holiday Pay

"I've been holding on stubbornly, but now it's really time to close down."

On the 19th, when news came that the 2024 minimum wage was decided to be 9,860 won, a 2.5% increase from this year, a convenience store owner in Dongjak-gu, Seoul, who has been running the store for 9 years, shared this story. This owner, who has already mobilized everyone from his eldest son to his wife to run the store in order to reduce labor costs since last year, said, "Isn't it as if the government has handed down a death sentence on my behalf, telling me to close down now?"

While the complaints of business owners have grown louder, have the conditions for workers improved? Ironically, quite a few workers say "making a living has become harder." Visible indicators show a similar trend. Over the past seven years, the minimum wage has increased by more than 52%, but various income inequality indicators have worsened, and the proportion of respondents in household surveys who answered that they belong to the 'low-income group' has increased. Even considering the complex effects of policy variables on the market, there is a question mark over whether the minimum wage increase has contributed to improving workers' quality of life. In short, business owners are struggling as business owners, and workers are struggling as workers.

Although this issue still sparks debate in the industry, many experts point to side effects of the rapid minimum wage increase such as business owners reducing staff and implementing ‘split shifts.’ Just as demand decreases when prices rise, employers reduce employment when wages rise. According to data released by the Korea Federation of Small and Medium Business, 58.7% of business owners cited reducing new hires and 44.5% cited cutting existing staff as impacts of the minimum wage increase on their businesses. This is why there is regret over the lack of measures to somewhat alleviate the shock of the minimum wage increase. However, alternative measures to reduce employers' burdens, such as differential application by industry or abolishing weekly holiday pay, were all rejected again this time. To be precise, due to repeated difficulties in deciding a uniform wage, there was no room to discuss issues like differential application.

What if the decision-making structure were revised? Instead of the current structure where labor and management representatives negotiate and a public interest commissioner mediates, the government could lead the decision while gathering opinions from labor and management. Many advanced countries have already adopted a system where the government leads the decision after discussions with labor and management. Under the current decision-making structure, it is difficult even to decide a uniform minimum wage, let alone differential application by industry, age, or region, or abolishing weekly holiday pay. These are just dreams. The minimum wage system, where ‘there are no winners, only losers,’ now calls for reconsideration of the decision-making structure.