Minimum wage discussion to strain businesses

30-Jun-2020 Intellasia | KoreaTimes | 6:02 AM Print This Post

The demand by unions for a minimum wage hike for 2021 is putting greater pressure on businesses, which are already reeling from the economic fallout from the COVID-19 pandemic.

Businesses say the state-set hourly wage should remain unchanged, otherwise layoffs will become inevitable. The unions, on the other hand, claim that as much as a 25.4 percent increase is needed to help workers address key outstanding issues sparked by the coronavirus outbreak. The increased wage bill, they argue, will lead to greater purchasing power to bolster consumption needed to keep the economy from crashing further. The current minimum wage is 8,590 won ($7.17).

Nine members representing unions, business and the public participated in the Minimum Wage Commission, a 27-member trilateral negotiating body, at a meeting at the Ministry of Employment and Labour at the Sejong government Complex, Monday. This was the first meeting held in 2020 after two previous ones which had been scheduled for June 11 and 25, were canceled.

Leaders of the nation’s two umbrella unions ? the Federation of Korean Trade Unions (FKTU) and the Korean Confederation of Trade Unions (KCTU) attended the meeting, with their opinion split. The KCTU with four seats at the table maintained its earlier stance that the minimum wage should be increased to 10,770 won, up 25.4 percent from this year. But the FKTU with five seats said up to 10,000 won was appropriate given corporate activities have rapidly deteriorated due to the virus.

Groups representing employers say the amount should remain unchanged. They includes the Korea Enterprises Federation (KEF) representing 4,317 firms ranging from those with fewer than 300 workers to over 1,000, and KBIZ representing some 3.6 million small and medium-sized enterprises (SMEs). The Korea Federation of Micro Enterprises representing 7 million such businesses said the amount should be lowered.

Their shared concerns over rising labour costs amid declining corporate profit margins were illustrated in a recent survey jointly conducted by the KEF and the KBIZ. In the survey of 429 members in March, more than half, or 55.3 percent said they would freeze hiring or reduce their current workforce if the minimum wage was raised considerably.

Some 20 percent had only minimum wage workers while about a third, or 33.1 percent, had both minimum wage workers and those earning slightly higher. Nearly half, or 45.1 percent, said they paid minimum wage for work that was repetitive and did not require a particular skillset.

A separate survey conducted in early June by the Korea Chamber of Commerce and Industry (KCCI) of 2,400 local manufacturers showed business sentiment had dropped to a level similar to that of the global financial crisis in the late 2000s. In the survey, the Business Survey Index (BSI) fell to 55 in the third quarter of 2020, down 2 points from a quarter earlier.

Both unions and businesses have to submit their respective decisions agreed upon amongst group members, following which the Commission will deliberate on a possible number via mediations. The discussion will continue through next month at a commission meeting held every other week or every three weeks. An agreement is required by mid-July, about 20 days before the labour minister notifies the public by August 5.


Category: Korea

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