'Subcontract-Based Minimum Wage' Becomes a Hot Issue... In the U.S., Platform Fees Passed on to Consumers

Rapid Changes in the Labor Market After COVID-19... Growing Number of Workers Left Unprotected
Conflict Intensifies Over Legal Recognition of Worker Status
Varying Work Structures by Occupation Make Uniform Standards Difficult to Apply

The reason why the agenda of the Minimum Wage Commission, which used to focus solely on how much the minimum wage should be raised, has expanded to include the question of who should be covered, lies in the rapid changes in the labor market. Since the COVID-19 pandemic, the spread of the gig economy—centered around delivery platforms—has led to a sharp increase in the number of workers left outside the protection of the minimum wage. It is estimated that there are currently about 8.7 million workers in Korea engaged in special employment and platform work. Among them, the number of platform workers rose from 660,000 in 2021 to 883,000 in 2023, a 33.8% increase in just two years.

The appearance of subcontract-based workers is not new. In the past, foremen at construction sites (commonly known as 'oyaji') and large freight truck drivers were also subcontract-based workers. Because their income increased in proportion to the work they did, and their work had strong characteristics of self-employment, they were not subject to the minimum wage. This is why Article 5(3) of the Minimum Wage Act—which states that if wages are generally determined by a subcontract or a similar form, and setting an hourly minimum wage is not appropriate, a separate minimum wage amount can be determined—has remained dormant in the law for 38 years.

Labor and management clash over legal recognition of worker status

The labor community argues that the situation of platform workers today is different from that of the past. Although they receive per-task fees, waiting time—whether on the street or in their cars—is essential, and in practice, they receive work instructions through AI dispatch algorithms. If they repeatedly reject assignments, their app rating is lowered or they are forcibly logged out, meaning they work under the invisible control of a boss. The biggest issue is whether their status as legal workers is recognized. From the management side, Okseok Yang, Director of Human Resources Policy at the Korea Federation of SMEs, stated, "In the absence of a legal definition for the worker status of subcontracted workers, the Minimum Wage Commission cannot unilaterally decide whether to apply the minimum wage." On the other hand, from the labor side, Miseon Lee, Vice Chairperson of the Korean Confederation of Trade Unions, argued, "A large number of workers are left outside the protection of the law just because their employment type is different," adding, "It is necessary to clearly define the recognition of worker status and the broader application of the minimum wage in the law."

On the 4th, ahead of the 3rd plenary meeting of the Minimum Wage Commission scheduled to be held at the Minimum Wage Commission in the Government Complex Sejong, Yang Kyungsoo, chairman of the Korean Confederation of Trade Unions, is making a statement demanding the application of minimum wage to subcontracted workers such as delivery drivers and couriers. Photo by Yonhap News

"Work structures differ by occupation... Difficulties in calculating the minimum wage"

The method of calculating the minimum wage is also a challenge. Delivery riders, substitute drivers, and couriers all have different work structures and performance metrics by occupation, making it difficult to apply a uniform standard. At the third plenary meeting, the Public Transport Workers' Union of the Korean Confederation of Trade Unions argued that the minimum wage for courier and delivery drivers should be 17,468 won per hour. This figure was calculated by adding the statutory hourly minimum wage (10,320 won as of this year) to 'hourly work-related costs' such as vehicle maintenance, fuel, and depreciation, as well as 'hourly social insurance contributions' including industrial accident, health, and national pension insurance. Jeonghun Park, Vice Chairperson of the Public Transport Workers' Union, explained, "If actual income falls short of this standard, the difference should be compensated, and if per-task income is higher, the worker keeps the higher amount as it is."

The U.S. model benchmarked by the Korean Confederation of Trade Unions..."Total income actually decreased due to fewer orders"

The Korean Confederation of Trade Unions has looked to New York, United States, as a benchmark. Beginning in December 2023 with food delivery workers, and more recently extending to grocery delivery workers, New York has expanded minimum wage coverage. These workers are guaranteed a minimum of $21.44 per hour (about 28,000 won), with waiting time after logging into the app and waiting for food included as work. However, due to strong opposition from employers, a method was also allowed that recognizes only pure working time but applies a premium to the general hourly wage. In Seattle, the minimum wage is guaranteed by combining a 'time rate' ($27.60 per hour) and a 'distance rate' ($0.47 per kilometer). Unlike New York, only the pure working time from accepting an order to completing delivery is recognized, but the time rate includes allowances for paid weekly leave and social insurance, while the distance rate covers fuel, vehicle depreciation, and insurance as maintenance costs. In the early stages of the system, the actual hourly wage of platform workers increased, demonstrating a positive effect by alleviating severe income instability. However, as companies passed the increased labor costs on to self-employed business owners and consumers through higher platform fees, the total number of orders plummeted, resulting in a decrease in workers' monthly total income. As a result, the debate over the minimum wage for platform workers is increasingly seen not just as a matter of wage increases, but as a societal choice about whether to incorporate new forms of labor into the existing labor law framework.

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