Minimum wage raise in South Korea could see unemployment spike

South Korea’s plan to raise the hourly minimum wage to 10,000 won (US$7.68) in 2024 could put up to 69,000 jobs at risk, the Federation of Korean Industries (FKI) has warned.

According to a study by the FKI, 28,000 to 69,000 jobs would be lost if the minimum wage is raised from 9,620 won (US$7.40) to 10,000 won. If the minimum wage is raised to 12,210 won (US$9.37), a potential 194,000 to 470,000 jobs could be lost, the FKI predicted.

Labour representatives on the minimum wage commission proposed a 26.9% year-on-year increase, setting the minimum wage at 12,210 won (US$9.37). This adjustment would provide a monthly income exceeding 2.55 million won (US$1,957) for those working an average of 209 hours.

If pushed through, this could have an adverse effect on young and low-income employees. According to the FKI, a minimum wage of 10,000 won would see 18,000 employees aged 15 to 29 lose their jobs, with the number increasing to 125,000 if the minimum wage is set at 12,210 won.

As many as 29,000 low-income employees, who make up the bottom 40 percent of South Korea’s income earners, risk losing their jobs if minimum wage is raised to 10,000 won, with the number increasing exponentially to 207,000 if the minimum wage is set at 12,210 won.

Small businesses with four or fewer employees would potentially lose 29,000 jobs at 10,000 won and up to 196,000 jobs at 12,210 won. The Korea Federation of Micro Enterprise, advocating for small businesses, has opposed the proposed minimum wage of over 12,000 won, stating it overlooks the hardships faced by low-income businesses relying on part-time employees.

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Negotiations within the minimum wage commission are expected to continue beyond the June 29 deadline, allowing stakeholders more time to assess the impact on job creation and economic stability, reported The Korean Times.