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Seoul instructing Kaesong tenant companies not to comply with North’s unilateral wage increase demand

On Apr. 2, the South Korean government officially instructed the South Korean companies operating in the Kaesong Industrial Complex not to comply with North Korea’s unilateral demand for an increase in the minimum wage. Nervousness is descending on the complex as Apr. 10, the date for paying wages for March, draws closer.

“Today, we sent an official document to companies, places of business, and supporting organizations specifying the standards for wages at companies in the Kaesong Industrial Complex,” said an official with South Korea’s Ministry of Unification.

“We cannot accept North Korea’s unilateral revision of the labor regulations, which increases the monthly minimum wage and social insurance contribution. Until both North and South come to a separate agreement, the wages for March are to be paid in keeping with the standard monthly minimum wage of US$70.35,” the South Korean government notice said.

After unilaterally revising the labor regulations in Nov. 2014, North Korea announced at the end of February that it was increasing the minimum wage by 5.18% to US$74 a month and that companies at the complex would have to pay the new wage starting in March.

The South Korean government proposed deciding the percentage of the wage increase through deliberations between the South Korean committee in charge of managing the Kaesong Complex and the North Korean government bureau that supervises special economic zones, but North Korea rejected this proposal.

The South Korean government also said it had told companies that they could be subjected to administrative and legal sanctions if they do not comply with its instructions.

In a previous warning, the Ministry of Unification listed a number of possible sanctions for noncompliant companies: refusing to allow them to visit North Korea, restricting their access to financial aid, and even revoking their business permit.

The government document also said that the question of improving the system and adjusting wages at the Kaesong Complex is one that must be decided by the North Korean and South Korean authorities.

“If North Korea sits down to the table, the wages can go up, too. It’s a problem when the North is unilaterally breaking agreements while also refusing to engage in dialogue,” said a senior South Korean official.

“Even after Apr. 10, it is possible that North Korea will opt to apply interest to the unpaid wages and demand their payment instead of taking more extreme measures,” said Kim Jin-hyang, a research professor at KAIST‘s Graduate School of Future Strategy.

“During this period, the South Korean government needs to bring North Korea to the table by offering to allow new investment in the Kaesong Complex,” Kim suggested.

In related news, a high-ranking South Korean government official criticized the idea of banning the launch of balloons filled with propaganda against North Korea in the interest of improving inter-Korean relations.

“Even if we ban the balloon launches, next time North Korea will demand that we stop the press from slandering Kim Jong-un, and after that they will make an issue of the joint military drills with the US,” the official said.

By Kim Ji-hoon, staff reporter

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