Amidst an economic slowdown, small and medium-sized enterprises (SMEs) and self-employed individuals are facing increased business burdens, and there is a forecast that the minimum wage for next year will rise sharply, pushing many businesses to their limits. Particularly, self-employed individuals, such as small store owners, who find it difficult to bear the pressure of wage increases, are voicing the need for not just freezing the minimum wage but actually lowering it, as the sluggish economy and high inflation persist.
However, there are concerns that the Minimum Wage Commission may not function properly amidst severe labor-management conflicts, exacerbating the worries of SMEs and self-employed individuals. In fact, with the scheduled full committee meeting of the 3rd Minimum Wage Commission on the 8th of this month, the government and major labor unions have shown confrontational stances regarding labor reform and the government's tough response to unions, raising expectations of a breakdown in the commission's discussions.
During President Moon Jae-in's administration, the number of "extremely short-hour jobs," which are considered precarious jobs due to the rapid increase in the minimum wage, has also more than doubled. According to an analysis of the "Employed Persons by Working Hours" data from Statistics Korea by Maeil Business Newspaper on the 4th, during the Moon administration period (2017-2022), while the minimum wage increased by 41.6% (2,690 won), the number of workers with weekly working hours of less than 36 hours increased dramatically from 4.413 million to 8.028 million, a surge of 81.9% (3.615 million). The proportion of workers with less than 36 hours of work among all employees was only 9.7% in 2000, but it has increased nearly threefold in 22 years. The 36-hour mark is one of the criteria that distinguishes short-hour workers from full-time workers. Short-hour workers are often in relatively poor conditions regarding wages, working conditions, and training opportunities, making them susceptible to low-quality "incomplete employment" jobs.
During the same period, the number of workers with less than 15 hours of work per week, categorized as extremely short-hour workers, also increased by 64.3%, from 960,000 to 1.577 million. Extremely short-hour jobs are more vulnerable to the side effects of legal loopholes as they are not subject to regulations regarding annual leave, severance pay, and weekly rest pay. For example, they are not covered by the four major insurances except for industrial accident insurance, and even if they work for more than a year, they cannot receive vacation days, let alone severance pay.
Amidst strained labor-management relations, there are growing concerns about the possibility of the minimum wage for next year being determined in a "hasty" manner, similar to the previous years. With the labor conflicts reaching extremes, there is a high possibility of a breakdown in the Minimum Wage Commission's discussions. The two major labor unions currently participating as labor representatives in the commission, which are deeply engaged in high-stakes struggles, further solidify their determination against the government. For instance, Kim Joon-young, a labor representative of the Minimum Wage Commission and the head of the Korean Metal Workers' Federation, who was engaged in a high-altitude sit-in protest, was forcibly detained and subsequently arrested on the 2nd, increasing their will to fight against the government.
If the Minimum Wage Commission breaks down, there is a significant possibility that the minimum wage for next year will be determined according to the existing method, which involves adding the forecasted economic growth rate (2.3%) and the forecasted consumer price inflation rate (3.5%) to the rate of employment growth and subtracting it. Depending on the circumstances, there is also speculation that the increase rate could be higher than the previous year's 5.0% rise.
The commission is required to determine the level of the minimum wage and submit it to the Minister of Employment and Labor within 90 days from the date of receiving the review request (by the end of June). The deadline for announcing the minimum wage is August 5th each year, and considering the objection process, the review should be completed no later than mid-July.
Meanwhile, at the grassroots level of the economy, there has been a significant increase in the number of business owners who have reached their limits due to the rapid increase in the minimum wage over the past few years and the economic slowdown. According to a survey conducted by the Federation of Korean Industries with 500 self-employed individuals on this day, in response to the question about considering closure due to the minimum wage increase, 36.2% of self-employed individuals answered that they are already in a "limiting situation." Additionally, 43.2% of respondents complained that the current minimum wage of 9,620 won per hour is already burdensome for their business. In addition, when asked about the employment impact related to the minimum wage increase for next year, 55.0% responded that they "currently have no employment flexibility." Furthermore, 9.2% of respondents stated that they would consider giving up employment or laying off existing employees if the minimum wage were increased by 1-3%, and 7.2% responded the same for a 3-6% increase.
Experts have pointed out that it is a critical point to discuss measures such as diversifying the application of minimum wages based on industries and regions, and that the Minimum Wage Commission is becoming more serious as it becomes entrenched in partisan interests. They also noted the lack of representativeness of the groups, as representatives of workers who are not directly affected by the minimum wage are involved in the consultations. Seok Byung-hoon, a professor of economics at Ewha Womans University, diagnosed, "If people who directly suffer from the rapid increase in the minimum wage and job loss are not participating in the discussions, a collective egoistic behavior will continue to repeat itself."
Jung Min Lee, a professor of economics at Seoul National University, also explained, "If the current operation of the Minimum Wage Commission is to be maintained, efficiency needs to be improved, starting with the composition of members. We need to establish a separate organization that can accommodate the opinions of labor and consider a reform that strengthens the decision-making power of experts."
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