KEF: "Minimum Wage Should Be Applied Differently by Industry"

Significant Industry-Specific Disparities

Markedly Low Minimum Wage Acceptance in Certain Sectors

The Korea Employers Federation (hereinafter referred to as KEF) announced on the 14th the publication of "The Need for Industry-Specific Application of the Minimum Wage and Its Implications," emphasizing that the minimum wage to be applied in 2027 should be implemented with industry-specific differentiation.

According to the report, the minimum wage, which was KRW 1,865 in 2001, will increase to KRW 10,030 in 2025, representing a rise of 437.8%. This is 5.7 times higher than the inflation rate (77.4%) and 2.5 times higher than the nominal wage increase rate (174.7%) for the same period.

On the other hand, the report notes that some industries in the Korean labor market are unable to bear this level of minimum wage, resulting in a significant decline in acceptance.

The report cites several reasons for the markedly low minimum wage acceptance in certain industries, including: a substantial gap in value added per employed person between industries, the minimum wage level relative to the median (average) wage, and the minimum wage noncompliance rate.

“Value added per employed person,” which indicates payment capacity and labor productivity by industry, was KRW 28.45 million in the accommodation and food service sector, accounting for only 17.1% of manufacturing (KRW 166.69 million) and 16.2% of finance and insurance (KRW 175.61 million). This shows that the accommodation and food service sector finds it difficult to meet even the current minimum wage level.

The minimum wage as a percentage of the median wage was found to be 87.1% in the accommodation and food service sector, raising concerns about a serious negative impact on the management environment and employment of small business owners in the sector. In contrast, the finance and insurance sector was analyzed to have a relatively low burden at around 40%.

The minimum wage noncompliance rate, which refers to the proportion of workers who do not receive the statutory minimum wage, was relatively low at 3.7% in manufacturing and 6.1% in finance and insurance. In contrast, the rate reached 31.6% in the accommodation and food service sector, showing a large gap of more than 20 percentage points between industries.

The report analyzed that such a high minimum wage noncompliance rate in sectors like accommodation and food service indicates that the current minimum wage is out of step with payment capacity at the workplace, making it a standard that is difficult to actually observe in practice.

2025 Minimum Wage Noncompliance Rates by Major Industries. Korea Employers Federation

The report emphasized that, unlike major advanced countries that apply various criteria for differentiating the minimum wage, Korea only allows industry-specific differentiation. Therefore, industry-specific application of the minimum wage is necessary to enhance its acceptance.

KEF pointed out that, contrary to the labor community’s claim that “advanced countries’ differentiated application always means raising the national minimum wage,” there are many cases where a lower minimum wage is applied by industry, region, or age compared to the general minimum wage.

For example, Switzerland sets lower minimum wages for agriculture and floriculture than for the general minimum wage; in the United States, some states (two states) operate state minimum wages that are lower than the federal minimum wage.

Ha Sangwoo, Executive Director of KEF, stated, "Given that payment capacity and productivity vary greatly by industry, applying the same minimum wage uniformly across all industries does not adequately reflect reality. For industries that clearly cannot afford the current minimum wage level, differentiated application is needed to improve the system’s acceptance in the field."

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