The legal minimum wage will rise 1.5 percent to 8,720 won per hour next year, the smallest gain since the system was introduced, as the country braces for a pandemic-triggered economic contraction.

The decision was made early Tuesday morning during the ninth plenary meeting of the Minimum Wage Commission, the rate-setting body composed of a total of 27 representatives -- nine each representing labor, business and the general public.

The new rate will take effect on Jan. 1 after the labor minister publicly announces it on Aug. 5. About 4.08 million workers who currently earn less than the rate will be direct beneficiaries. 

“The difficulties and uncertainties facing the local economy have been the most important factors considered,” said professor Kwon Soon-won of Sookmyung Women’s University, who leads the nine public-interest representatives appointed by the government.

“Income level is important, but not more important than the job itself,” the professor added.

The increase of 1.5 percent, or 130 won, was a proposal from the group that was put to vote in the absence of a compromise between labor and business members.

It represents the smallest-ever raise since the minimum wage system was first introduced in 1988. The previous low was a 2.7 percent increase recorded in 1998, during the Asian financial crisis.

Labor groups said this year’s negotiation did not just arrive at the “smallest” gain in wages, but labeled it “the worst” ever. It cried foul over the way the public-interest commissioners pushed for a vote on their own proposal in spite of a boycott of labor members. The 1.5 percent raise plan was passed in a vote of 9-7, with only nine public-interest commissioners and seven business commissioners in attendance.

“Even during the 1998 foreign currency crisis and 2010 (global financial crisis), we didn’t see such a number,” the Federation of Korean Trade Unions said in a statement. The hourly rates had risen 2.7 percent and 2.75 percent, respectively, in 1998 and 2010.

Business groups, which argued for next year’s rate to be cut or frozen, expressed disappointment. They said the decision will add burden to struggling businesses, asking the government and related parties to prepare additional solutions for enterprises to overcome the economic crisis.

“Considering the extreme economic struggle and 32.8 percent hike (in legal wages) over the past three years, the additional 1.5 percent hike will serve as another burden for numerous enterprises and proprietors fighting for survival,” said the Federation of Korean Industries in a statement.

“This decision is concerned to expand the struggle of young job seekers and day-to-day workers while deepening the employment crisis.”

The Korea Enterprises Federation criticized in a statement that the current rate-setting system led by government-appointed representatives has limits to reach reasonable decisions, asking changes to be made in deriving calculated solutions based on figures.

Representatives of the business community had demanded a 1 percent cut, revised down from their initial demand of a 2.1 percent cut. Labor representatives wanted a 9.8 percent hike from the initial demand of a 16.4 percent increase.

By law, the labor minister can request the commission reevaluate the proposed wage change, although there is no such precedent.

By Ko Jun-tae (ko.juntae@heraldcorp.com)