Park Nam-gyu Park, Professor of Business Administration at Seoul National University, in Munhwa Ilbo (April 07, 2021)
Summary by Paul Forien (Photo credit: Jeon Han/Ministry of Culture, Sports and Tourism of the Republic of Korea)
The Minimum Wage Committee has launched its review for next year's minimum wage. It is, however, unlikely that its members will easily draw a conclusion because of the clear differences in position among the representatives of the various interests including government, employers and workers.
Giver price rises it would be great if workers could comfortably raise their hourly wages as they have called for. It is by no means simple, however. For a minimum wage increase to create a sustainable economic virtuous cycle, three important prerequisites must be met. The first is an increase in worker productivity. If the rate of productivity growth cannot catch up with the wage increase of workers, the company will have difficulties surviving in the market.
Second, there must be enough jobs to pay more than the minimum wage. Most of the minimum-wage jobs are at companies in the lodging/food, sports/leisure-related services, agriculture, forestry and fishery industries, where competitiveness is weak. Firms in these sectors often have a hard time surviving even with the smallest wage increases, which may lead to job losses.
Third, the demand for minimum-wage labor in the market must exceed the supply. Otherwise, those with jobs, whether by ability or luck, may be adversely affected by the policy, receiving higher than appropriate market wages. The current labor market shows very high disparities in terms of diversity and complexity which make it more difficult to have a practical effect on the minimum wage determined by a single standard.
Considering all the reasons above and that contracts between employers and workers are economic transactions in the private sector, classifications of the minimum wage by industry or region could be outdated. It is necessary to re-examine whether government involvement in the market is required and to restart a debate about the minimum wage.