S. Korea raises minimum wage to 8,720 won for 2021

Posted on : 2020-07-14 17:07 KST Modified on : 2020-07-14 17:07 KST
1.5% rate of increase is lowest in minimum wage system’s history
A vote on raising the minimum wage during the ninth plenary session of the Minimum Wage Commission at the Government Complex in Sejong on July 14. (Yonhap News)
A vote on raising the minimum wage during the ninth plenary session of the Minimum Wage Commission at the Government Complex in Sejong on July 14. (Yonhap News)

The 2021 minimum wage has been set at 8,720 won (US$7.23), an increase of 130 won from its 2020. The 1.5% rate of increase is the lowest since the South Korean minimum wage system was introduced in 1988.

A ninth plenary session of the Minimum Wage Commission (MWC) was held until around 2 am on July 14 in the MWC plenary session conference room at the Sejong Government Complex, with a total of 16 people attending, including all public interest commission members and a portion of employer members. A minimum wage of 8,720 won per hour was proposed by the public interest members and submitted for a vote, where it was approved by a margin of nine to seven. Representing an increase of 130 won from the 2020 level of 8,590 won, the amount translated into a monthly wage of 1,822,480 won (US$1,510) for an employee working 209 hours. That amount is 27,170 won (US$22.52) higher than the 1,795,310 won (US$1,488) for the same conditions this year. All nine worker representatives and two of the employer representatives left the premises before the vote.

Meeting with reporters after the vote that day, MWC Chairperson Park Joon-shik said, “With unpredictable uncertainties far greater this year than last year, the decision was made to prioritize the preservation of the labor market and sustainable jobs.”

“It is unfortunate that the worker representatives and small merchant representatives left at the last moment, but the labor, management, and public interest representatives did their best to harness their wisdom amid a crisis situation that must be overcome at the national level,” he added.

Explaining the basis for the decision, Kwon Soon-won, a Sookmyung Women’s University business administration professor and secretary for the public interest commission members, said, “We added up the 0.1% projected economic growth rate for this year, the 0.4% rate of increase in consumer prices, and 1.0% for improvement in living costs.”

Increase rate lower than that of Asian financial crisis and global financial crisis

After the Moon Jae-in administration arrived in office, the minimum wage rose by a double-digit rate for two straight years in 2018 (16.4%) and 2019 (10.9%) before falling to 2.87% in 2020. The 1.5% rate for next year represents another decline -- even lower than the 2.7% rate applied for September 1998 to August 1999 in the wake of the Asian financial crisis or the 2.75% applied for 2010 amid the global financial crisis.

While the number reflected the 2020 global COVID-19 pandemic as well as efforts since last year to slow the pace of minimum wage adjustments, the labor community is expected to fiercely protest the decision to keep the rate of increase in the single digits for a second year running.

“We’ve never seen a case of such a terrible minimum wage plan,” said Federation of Korean Trade Unions (FKTU) General Secretary Lee Dong-ho, who walked out at 1:20 am on July 14 to protest the low rate in increase in the minimum wage -- joining the Korean Confederation of Trade Unions (KCTU), which walked out the previous afternoon.

“The public interest commission members have basically sentenced the Republic of Korea’s minimum wage to death,” Lee said. Among the employer representatives, Korea Federation of Micro Enterprise Vice Chairpersons Oh Se-hee and Kwon Soon-jong walked out to protest the fact that the plan did not involve reducing the minimum wage.

According to the Minimum Wage Act, the Minister of Employment and Labor must announce the plan for next year’s minimum wage by Aug. 5 following its submission by the MWC after the vote on July 14. Once the minimum wage has been announced, it enters effect as of Jan. 1 of the following year.

By Kim Yang-jin, staff reporter

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