By Joon Kim
South Korea’s president stated on Monday that his administration may not be able to raise the national minimum wage above 10,000 KRW, one of his earliest campaign pledges, before the end of 2020.
President Moon Jae-in said, for the first time since May 2017, that it would be virtually difficult to lift the hourly minimum wage within two years, stated JTBC. He also added that the pacing to lift the minimum wage could not be considered a “mechanical goal,” and cannot be reached solely with the administration’s volition.
“I apologize for not being able to fulfill my campaign pledge,” President Moon Jae-in said.
Moon’s recent official apology may indicate that he would try to reach his initial pledge within 2022.
A high-ranking official at the Blue House, South Korea’s presidential office, told JTBC that Mr. Moon’s economic pledge, part of his demand-led growth initiative, would “continue to remain on its course,” while the administration would try to “flexibly” use every method on its stead during the process.
However, Moon’s plea has already met with deep concern over the nation’s economic operation for the latter half of 2018.
The Minimum Wage Commission decided Saturday to jack up the minimum wage for 2019 by 10.9 percent to 8,350 won ($7.40) per hour from the current 7,530 won. The 16.4 percent increase rate for this year was the biggest in about two decades.
This two-digit growth could worsen the nation’s economic situation, especially blowing corporate trade and employment correspondence, said Deputy Prime Minister Kim Dong-yeon on Tuesday.
The government’s financial interference with the economic market rate is “not a preferable appearance,” stated Mr. Kim. He said that he would try to “save” the national economy’s foundation within “canonical boundaries.”
It is forecasted that the government would opt to lower rents and card fees, and prevent aggressions from company franchises. But hours after the Commission’s announcement, the Modern Index Strategy saw the greatest negative impact on South Korea’s convenience stores. GS Retail, a conglomerate industry, suffered a two-digit drop in monthly shares alone.
Plans to close at least 70,000 convenience stores have already taken place in South Korea beforehand. One store owner said he has no choice but to replace store employees with his family members. The Commission’s “foolish” decision will allow part-time employees to gain more income than himself, the owner.
The group of small business owners called the wage increase a “unilateral decision” and said it would be difficult for them to implement.
Sin Se-don, the professor of Economics from Sookmyung Women’s University also said in an interview by Arirang News, “Initially, they have different minimum wage for different jobs, that was the ask from those small business. And more important thing is, the government should never try to do something to those workers, the government have to prepare equally important measures for the small shop owners.”
He added, “That’s why there are so many small business owners are so furious about government. The government should prepare comprehensive policy to make small business owners more competitive in a very high minimum wage environment. That’s what I think the government has to do.”
Some of the food chains, for example, Lotteria, in South Korea are rushing to introduce self-service kiosks to reduce labor costs.
It is one of a number of signs that Moon Jae-in’s reform bills backfires, and he aims to be “Job President” who tackles inequality might be at risk, economists warn.