"Annual Job Losses Could Reach 440,000 If Minimum Wage Rises by 16.3%"

A 5% Increase in Minimum Wage

Could Lead to a Loss of 150,000 Jobs

A new study has found that if next year’s minimum wage is raised by 16.3%—the level proposed by labor unions—more than 440,000 jobs could be lost annually and corporate investment in innovation may also shrink.

The Federation of Korean Trade Unions, the Korean Confederation of Trade Unions, and the Minimum Wage Movement Headquarters for All held a press conference announcing the minimum wage demand for 2027 on the stairs of Sejong Center for the Performing Arts in Jongno-gu, Seoul. Photo by Dongju Yoon

On June 23, FTA Research Institute released its analysis on ‘The Economic Impact of Minimum Wage Increases.’ According to the study, a 16.3% increase in the minimum wage would lead to an annual decrease of 810 billion won (0.3%) in real gross domestic product (GDP), a reduction of 443,000 jobs (1.9%), and a decline of 400 billion won (0.3%) in total innovation investment.

The institute projected that raising the minimum wage would shrink employment and production among small businesses sensitive to wage changes, and reduce innovation investment—such as new product development—due to increased labor costs. Furthermore, it analyzed that reduced production among small businesses would drive up product prices and negatively affect the production of general companies supplied by these businesses.

The analysis also predicted that even relatively modest minimum wage increases would have significant impacts across industries. According to the study, a 5% hike in the minimum wage would result in a 260 billion won decrease in real GDP, a loss of 151,000 jobs, and a reduction of 100 billion won in total innovation investment. With a 10% increase, real GDP would fall by 510 billion won, 288,000 jobs would be lost, and total innovation investment would decline by 200 billion won.

Rha Jungjoo, the head of the institute who led the research, argued, “As of 2024, Korea’s minimum wage is already relatively high at 60.5% of the median wage for full-time workers. Excessive increases in the minimum wage could have negative effects on employment, investment, and economic growth.”

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