Fair Trade Commission chief Kim Sang-jo on Monday said the government’s financial aid to small firms to help them pay for the minimum wage hike will be temporary, in light of growing debate over the government’s surprise decision and its sustainability.

“It will not be possible for the government to give financial aid to the private sector for long,” Kim said during a breakfast meeting held at the Korea Chamber of Commerce & Industry.

Kim’s remark came after the government made an impromptu announcement Sunday that it would financially aid some small business owners to help them pay for the minimum wage hike amid growing protests from small and medium-sized firms.
 

On Saturday, the government’s minimum wage committee decided to increase the nation’s minimum wage by 16.4 percent next year to 7,530 won ($6.70), the biggest jump since 2001, as part of President Moon Jae-in’s pledge to raise the minimum wage to at least 10,000 won by 2020.

“The government must be aware of concerns over the sustainability of (the financial aid). It will ultimately carry out sustainable policies to make the market itself fairer and freer,” the antitrust watchdog head added.

During the meeting, Kim also said the nations’ top conglomerates should be reformed in a way to curb the concentration of economic power and improve corporate governance in order to achieve economic democracy.

“In order to make more effective reforms, regulations on large companies should be imposed differentially. More rigorous regulations should be imposed on the nation’s top four and top 10 conglomerates,” he said.

Currently, the combined sales of the top four groups, Samsung, Hyundai, SK and LG, account for more than half of the nation’s gross domestic product. The market value of the top 10 companies also exceeded the total market value of listed Korean firms this month, showing the massive concentration of economic power in the hands of a few conglomerate owner families.

The FTC also plans to carry out an ex-officio investigation later this year into family-owned conglomerates on charges of unfair internal transactions, or unfairly giving business to affiliates.

“We found many unfair internal transactions among affiliates after reviewing internal transactions of the nation’s top 45 conglomerates. We will carry out an ex-officio investigation before fall,” Kim said in an interview with a local media outlet released Monday.

As for the future direction of the FTC, he said the antitrust watchdog would improve market order and balance out the trickle-down and fountain effect for the economy.

Trickle-down economics refers to benefits for the wealthy spreading to everyone else. The fountain effect describes the overall aggregate demand of middle-class people driving the economy.

“The trickle-down effect the Korean economy has seen over the last 30 years no longer works as the connection between the trickle-down effect and economy growth broke,” he said.

By Shin Ji-hye (shinjh@heraldcorp.com)