Korea's hourly minimum wage for next year is expected to rise by at least 2.2 percent from this year. As the minimum wage moves toward an increase while the sector-based differential application long demanded by small business owners was again scrapped in this year's discussions, the labor cost burden on the self-employed is expected to grow further.
The Minimum Wage Commission held its 14th plenary session at the Government Complex in Sejong on the 14th, continuing last-minute negotiations over next year's minimum wage level. In their 10th revised proposals that day, labor proposed 11,150 won per hour and management proposed 10,550 won. Compared with this year's minimum wage of 10,320 won, these represent increases of 8.0 percent and 2.2 percent, respectively.
The gap between the minimum wage figures proposed by labor and management narrowed to 600 won. As the employer members stepped back from their demand for a freeze and proposed a 2.2 percent increase, the likelihood grew that next year's minimum wage will rise at least above this year's level. The labor side also lowered its figure by 850 won from its initial demand of 12,000 won, and while both sides repeatedly submitted revised proposals, differences over the scale of the increase remain.
Labor and management again engaged in fierce debate during this year's minimum wage deliberations. Labor initially proposed 12,000 won, a 16.3 percent increase from this year, while management proposed 10,320 won, the same as this year. They subsequently narrowed the gap through 10 revised proposals, but labor pushed for preserving the real wages of low-income workers, while management stressed the deteriorating ability of small businesses to pay, with the two sides remaining at odds.
Next year, the minimum wage will again be operated as a single wage system without sector-based differentiation. Management has argued that a separate minimum wage should be applied to sectors with low ability to pay, such as lodging and food service. Labor, on the other hand, opposed this, saying sector-based differentiation would create a stigma effect on low-wage industries and threaten workers' right to survival. In the end, sector-based differentiation was rejected again in this year's deliberations. Excluding the first year of the minimum wage system's introduction in 1988, this marks the 39th consecutive year of a single minimum wage system.
Public interest members of the Minimum Wage Commission also raised the need for institutional improvement amid the recurring controversy over sector-based differential application. The public interest members said, "Society as a whole is changing rapidly, yet similar discussions stall every year," and recommended that the government prepare measures to improve the minimum wage system.
Small business owners appeal that if the minimum wage rises even as sector-based differentiation has been scrapped, the burden on small establishments could reach its limit. Two employer members representing small business owners walked out of the meeting during the earlier deliberation process, saying, "We cannot accept even a 2 percent increase."
In fact, if the minimum wage rises 4 percent, a 24-hour convenience store employing six part-time workers on weekdays and weekends is estimated to see its annual labor cost burden—including social insurance premiums and severance pay reserves—increase by around 5 million won. If workers regularly work overtime, the additional burden could grow to around 5.5 million won per year. This means that even if the minimum wage increase rate itself remains in the single digits, cost increases could accumulate in industries where long operating hours and the employment of numerous part-time workers are unavoidable.
