[Editorial] Minimum Wage Raised by 3.7%...Government Must Pursue Systemic Reform

Next year’s minimum wage has been finalized at 10,700 won per hour, an increase of 380 won (3.7 percent) compared to this year. Based on a 209-hour work month, this amounts to a monthly wage of 2,236,300 won. Depending on the survey method, between 660,000 and 2,978,000 people will be affected. Although both labor and management have expressed dissatisfaction, the decision to raise the wage floor to ensure greater livelihood security for low-income workers deserves respect. However, the decision-making process revealed limitations and left behind several unresolved issues.

This year as well, the minimum wage decision was made after the statutory deadline of June 29 had passed. This has become a routine occurrence each year and is seemingly accepted as the norm. As in the past, negotiations between labor and management ended in a vote. On June 23, labor representatives proposed 12,000 won as next year’s minimum wage, while management representatives advocated for a freeze. Although twelve revised proposals were exchanged to narrow the gap, no consensus was reached. Ultimately, the decision was determined by a vote of 27 commissioners—nine representing labor, nine representing management, and nine public interest commissioners. This method of decision-making has been used since the introduction of the minimum wage system in 1988.

It is time for change. The decision-making process lacks transparency, and the criteria presented by each side are inconsistent, resulting in parallel discussions between labor and management. In the end, the final outcome depends on the positions taken by the nine public interest commissioners appointed by the government. There has also been ongoing criticism that the commission’s size—27 members—makes efficient discussion and consensus difficult. In France, five people determine the minimum wage, and in the United Kingdom, it is decided by nine commissioners.

Above all, there is a lack of specificity and clear criteria in how the minimum wage is calculated. Article 4 of the Minimum Wage Act stipulates that “the minimum wage shall be determined taking into account the living costs of workers, wages of similar workers, labor productivity, and the income distribution ratio.” Due to these broad rules, labor and management have continued to present conflicting data during negotiations. Labor emphasizes living costs and inflation, while management stresses productivity and ability to pay. It remains unclear which period’s statistics to use for each indicator and to what extent each should be weighted.

The public interest commissioners of the Minimum Wage Commission recommended that the Ministry of Employment and Labor establish a “system improvement task force” and prepare overall improvement measures. The government must not disregard these recommendations, and should actively work to improve the system. In addition to reviewing the various forms and applications, there should be clear rules established regarding the number of commissioners and how indicators are to be reflected in terms of period and weighting. The scenario this year, in which the outcome was settled by a vote even after narrowing the gap to just 30 won, must not be repeated next year.

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