Accommodation and Food Services vs. Finance and Insurance
Per Capita Value Added Gap Reaches Up to Sixfold
The Korea Employers Federation (KEF) pointed out that there is a productivity gap of up to six times or more per person depending on the industry, and argued that the minimum wage level should also differ by industry.
According to the KEF on June 19, 2024, the value added per employed person in the accommodation and food service industry and the financial and insurance industry was 28.11 million won and 181.69 million won, respectively, showing a difference of about 6.4 times.
By industry, the accommodation and food service sector generates per capita value added equivalent to only 18.3% of that in the manufacturing sector and just 15.5% of that in the financial and insurance sector. The KEF pointed out, "Uniform application of the minimum wage without considering each industry's ability to pay and labor productivity reduces the acceptability of the minimum wage."
The KEF also noted that there are industry differences in the 'minimum wage to median wage ratio,' which indicates the level of the minimum wage relative to the wages of workers in each industry. In 2024, the minimum wage to median wage ratio in the accommodation and food service industry was as high as 85.6%, whereas it was relatively lower at 42.8% in the financial and insurance industry and 56.7% in manufacturing.
The 'proportion of workers earning less than the statutory minimum wage' in each industry, known as the minimum wage non-compliance rate, was 33.9% in the accommodation and food service industry. In contrast, it was relatively low at 4.6% in the financial and insurance industry and 3.9% in manufacturing, resulting in a significant gap of about 30 percentage points between industries.
The KEF emphasized the need to differentiate the minimum wage by industry in Korea, citing examples from major advanced countries that apply minimum wages using various criteria.
According to KEF's analysis of minimum wage systems in 26 OECD countries, 21 countries differentiate minimum wages based on various criteria such as industry, age, region, and skill level. Switzerland sets a lower minimum wage for agriculture and floriculture compared to the general minimum wage, while three US states have state minimum wages lower than the federal minimum wage. Ten OECD countries, including the United Kingdom, France, and Canada, also differentiate minimum wages by age group.
Ha Sangwoo, Executive Director of the KEF, said, "Given the current situation where the minimum wage level has increased, the need for differentiated application by industry has become very significant," and emphasized, "It is time to allow differentiated application, at least for those industries that have been proven unable to bear the current minimum wage."
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