The minimum wage, which was 6470 won in 2017, jumped 16.4 percent to 7530 won ranking the highest rate of increase in 16 years. This year, however, an additional increase in minimum wage has been decided on, which has become controversial. Next year's minimum wage is 8,350 won, which will be applied immediately starting next year in January. Most candidates in the last presidential election pledged to raise the minimum wage to about 10,000 won, but paradoxically, President Moon Jae-in is now receiving massive criticism from other political parties.
The definition of minimum wage is defined as a system in which a government intervenes in the wage determination process between labor and management. The government to determine the minimum level of wages to protect low-wage workers by forcing the employer to pay wages above this level.
The definition of the minimum wage shows that this system can solve social problems in labor, but a large number much of the media strongly criticize the increase in the minimum wage, saying that the increase in minimum wage will completely break the balance of the economic market. Is the increase in the minimum wage unconditionally bad as it seems in the media?
In South Korea, the ratio of total manual workers is 23.7%, which is the third highest among OECD member countries. Income inequality between the top 10% (90th percentile) and the bottom rank 10% income is also the third highest among OECD member countries. The increase in the minimum wage is an effort to reduce inequality in compensation for the same work. Additionally, increase in the minimum wage can contribute to improving the quality of life of workers. By increasing the minimum wage, wage inequalities can be reduced between big businesses and small businesses. This will reduce the turnover rate of large companies and increase the competitiveness of small companies, which can be seen in the case of European countries.
In addition, the new minimum wage will guarantee laborers to live a decent human life, which is a basic human right. Through the increase in minimum wage, it will help ease out those who had financial difficulties in catching up to maintain their life and family.
In addition, the minimum wage increase, which can be said to be part of the income-led growth, can stimulate consumption. In order for the economy to show vitality, high domestic consumption is necessary. This means that the increase in income of households will naturally return to the market, which will help to boost the economy. This is called the ‘Fountain Effect’. In order for the economy to be strong, the life of the middle class and the vulnerable should be enriched rather than the upper class only. The first step to reach such an ideal society is the minimum wage increase.
On the contrary, what problems can arise from the increase in the minimum wage? The first problem we may encounter is price inflation. Enterprises will raise the price of their products in order to maintain their profit from the increased personnel expenses due to the rise in the minimum wage. The second problem would be low employment. The company will also choose to reduce the number of hired employees to address the cost of increasing labor costs. To summarize, the advantage of the increase in minimum wage is the improvement of the lives of the lowest-ranked workers and the drawbacks would be the countermeasures of the companies.
Only a few years ago, there was a time when workers couldn’t afford a simple meal after working for an hour in a factory. Such a disastrous situation for workers can cause workers to lose their willingness to work and to feel skeptical towards their life. The corresponding treatment of the workers will be the simplest and the only way to boost the economy.
|▲ the ratio of total manual workers is 23.7%, which is the third highest among OECD member countries.
By Jeong Seung-In, reporter email@example.com
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