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(EDITORIAL from Korea Times on Dec. 28)

2017/12/28 06:58

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Minimize side effects

: Minimum wage hike aimed at reducing polarization

The minimum wage will increase by 16.4 percent to 7,530 won ($7) per hour starting Jan. 1. The rise is in accordance with a decision made by the Minimum Wage Commission in July to that effect. It is also part of President Moon Jae-in's commitment to hike the legally-binding hourly wage to 10,000 won by 2020.

However, the minimum wage has become a contentious issue as labor and management are still poles apart on how much to increase it. Some business lobbyists are trying to neutralize the double-digit hike to stop labor costs from going up. They are also attempting to block a further increase to 10,000 won.

It is meaningless to claim that the minimum wage is set too high. The reason is because many businesses have exploited labor to maximize their profits, although wages have risen substantially over the last decades. They have to admit the minimum wage is still low considering that a large number of part-timers and irregular workers are struggling to pay their bills with the low pay.

Let's look at the broader picture. The exploitation of labor has widened the gap between the rich and the poor. It has also deepened social polarization. If we cannot address this problem, we may face a crisis which is more serious than the 1997-98 Asian financial crisis. So raising the minimum wage is a first step toward narrowing the gap and making Korea a fair and just society.

All concerned parties ― labor, management and government ― should work together to minimize the side effects of the higher minimum wage. Businesses, particularly small companies and the self-employed, are feared to take the brunt of climbing labor costs. Many of them may consider reducing hiring or introducing automation. This may make the job market tighter.

To prevent these side effects, the government created a 3-trillion-won job stabilization fund for small businesses employing fewer than 30 workers. It plans to provide up to 130,000 won in subsidies for each worker to help employers offset the effect of the wage hike. However, this measure is not sufficient for businesses to maintain their employment or hire more workers.

Therefore more fundamental measures should be taken. First it is necessary to transform the labor-driven economic structure into a labor-efficient one that can provide goods and services with added value. For this, the government must offer more financial support for small- and medium-sized businesses to encourage research and development for technological innovation.

Most of all, the authorities should create a level playing field for small businesses and large companies to work together for coexistence and co-prosperity. Only then can President Moon's income-led growth policy produce success benefitting both workers and corporations.