South Korea's minimum wage for next year has been set at 7,530 won per hour, up 16-point-four percent, or one-thousand-60 won from this year.
The record increase is touted as a triumph for workers but there are concerns small businesses will be unable to shoulder the increased financial burden, impacting their survival rates.
The Minimum Wage Commission, a trilateral council of officials representing workers, employers, and the general public, held a plenary meeting last Saturday, and decided on the raise for next year in a vote on revised proposals. Fifteen of the 27-member commission voted for 7,530 won as demanded by labor groups, while 12 members voted for 73-hundred won as requested by employer representatives.
The 16-point-four percent raise is the largest since 2000 and more than double the average increase in recent years.
Over 4.6 million people, or 23 percent of the total workforce, are expected to benefit from the minimum wage hike. Minimum wage earners working a 40-hour week will receive a monthly salary of just over 1.57 million won, which is 220-thousand won more than this year.
Maternity and unemployment benefits will also rise as they are based on the minimum wage.
However, the hike does not satisfy labor bodies’ long-standing call for a minimum wage of at least ten-thousand won per hour, which they say is necessary to cover living costs.
President Moon Jae-in has promised to increase the minimum wage to ten-thousand won per hour before his five-year term ends in 2022. Annual growth of 15.7 percent is required to realize this goal and next year's rate hike is the first step in reaching this goal.
However, employers argue that small companies face a threat to their survival. They say the labor sector and those responsible for the rate decision should be held accountable for all problems that may arise in the future.
The Korea Federation of Small and Medium-sized Businesses said the move has increased labor costs by over 15 trillion won. The government will provide fiscal aid to alleviate the increased burden on small firms and business owners but critics say there are limits to these direct subsidies which can’t be provided forever.