The minimum wage for next year has been set at 9,160 won ($8) per hour, up 5.1 percent from this year.

It was 6,470 won in 2017, the first year of the Moon Jae-in presidency, and rose 41.6 percent in five years to top 9,000 won for the first time.

Laborers demanded a 23.9 percent hike to lift the minimum wage above 10,000 won. They cited that this year was the last chance to fulfill Moon’s election pledge to raise it to 10,000 won during his presidency. Also given that increase rates for last and this year were relatively low -- 2.9 percent and 1.5 percent respectively – it needed to go up considerably this time.

Employers demanded a freeze, blaming the steep rises in minimum wage for 2018 (16.4 percent) and 2019 (10.9 percent) that caused the self-employed and small businesses to suffer.

Four commissioners representing laborers of the Korean Confederation of Trade Unions and all of the nine commissioners representing employers in the Minimum Wage Commission walked out of the negotiation. The remaining 14 commissioners, including five from the Federation of Korean Trade Unions, voted to adopt the arbitration plan suggested by the nine public interest commissioners appointed by the government.

The public interest commissioners say the minimum wage was based on this year’s growth outlook of 4 percent. But last year’s 0.9 percent negative growth had a base effect on it. This year’s outlook also reflects positive anticipation for recovery from the COVID-19 pandemic. It is not reasonable to base a decision critical to the fate of numerous self-employed and small enterprises on an uncertain future. The minimum wage is set each year. It is not too late to wait to make such a decision after the economy recovers.

The Moon administration has pursued its unproven “income-led growth” under the pretext of benefiting laborers. The side effects so far are serious, as everyone knows. Companies have gone out of business, reduced workforce or introduced automation. Those self-employed people who could not bear higher minimum wages laid off employees. As a result, the number of self-employed people with employees decreased each year from 2018 and hit a 31-year low last month. The number of part-time employees who work fewer than 15 hours a week hit an all-time high in May. This is because holiday pay was too burdensome to small businesses.

A serious problem with the minimum wage increase for next year is that difficulties due to the pandemic were not considered sufficiently. Social distancing measures have driven microenterprises to the brink for a year and a half. Their situation is getting worse and worse due to the recent upgrade of social distancing to the highest level of the four-tier system. The government and ruling party have been racking their brains over the size of COVID-19 relief checks and the range of their recipients, including microbusinesses. Their desperate pleas can be heard from various quarters. The Korea Federation of Micro Enterprise said in a statement that the increase in next year’s minimum wage ignores the dire reality of microbusinesses. Restaurant owners began a relay protest in front of the National Assembly.

Whenever employers and laborers negotiate over a new minimum wage, they stick to their positions and, at the last minute, public interest commissioners rush to put their unilateral arbitration to the vote. This was repeated once again this year.

Changes are needed in the minimum wage determination system. It ought to consider such factors as labor productivity and employers’ ability to pay. Also, regional and industrial characteristics must be taken into account. It is irrational to apply the same minimum wage to employees working in convenience stores in a sparsely populated rural village and a crowded Seoul area.

According to a study requested by the Korea Economic Research Institute, minimum wage increases in 2018 and 2019 led to losses of 159,000 and 277,000 jobs, respectively. Pressed by a higher minimum wage, microenterprises shuttered and employees lost jobs. For whom is the minimum wage raised?