A Report on Korean Minimum Wage Suggestion by President Moon

This report provides an evaluation of President Moon's suggestion to increase the minimum wage in South Korea. It begins with an introduction to the Korean economy and its ranking in the Asia-Pacific region, highlighting its economic freedom and recent shift towards populist spending. The report disc...Read More

KOREAN MINIMUM WAGE SUGGESTION BY PRESIDENT MOON EVALUATION 1
KOREAN MINIMUM WAGE SUGGESTION BY PRESIDENT MOON EVALUATION
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KOREAN MINIMUM WAGE SUGGESTION BY PRESIDENT MOON EVALUATION 2
Introduction
Korea is among the richest nations in the Asia Pacific region having been ranked position seven
out of the forty three nations in the region (Moo‐Ki, 2012). Korea embraces a free economy with
a score of 73.8 of economic freedom and is ranked position 27 in terms of economic freedom
according to the 2018 Index. The Korean economic growth score is above the expected world
and regional averages. Corruption has been intense in Korea and even led to impeachment of
President Park Geun-hye and President Moon Jae-in was sworn in. the current government has
focused on moving the economy from supply-side or rather export dependence to more of
populist spending. This has made it necessary for better pay to Korean employees.
Discussion
Generally, minimum wages refer to the pay that employees should receive from their employers
as remuneration for the work they perform over a given period of time. Minimum wages are set
in order to protect the employees from being mistreated by their employees by being paid poorly.
Minimum wages also minimize poverty and income disparity by stating equal pay for work
which has equal value. In Korea, minimum wage rates for each year are proposed by the
Minimum Wage Council which consists of 27 members. It’s made up of representatives of three
bodies namely the government, employers and the employees (Park, Lim, Sams, Nam and Park,
2011). The final rates are however determined by the Ministry of Employment and Labor
depending on the prevailing market conditions and set economic goals and policies.
According to the Organization for Economic Cooperation and Development, Korean minimum
wages have been lagging behind as compared to the other nations such as Australia which is in
the same region. This is despite the fact that the Korean minimum wages have been increasing

KOREAN MINIMUM WAGE SUGGESTION BY PRESIDENT MOON EVALUATION 3
each preceding year. This therefore necessitates the need for Korean minimum wages to be
raised if at all the nation wishes to foster its economic growth at a fast rate (Chang, 2011). The
following graph shows the Korean minimum wages from the year 2008 to 2018:
2008 2010 2012 2014 2016 2018
3000
3500
4000
4500
5000
5500
6000
6500
7000
7500
8000
Korean Minimum Wage Rate per Hour from 2008 to 2018
Minimum Wage Rate per Hour
Year
Minimum Wage Rate per Hour
The above diagram shows that minimum wage rates per hour in Korea have been increasing but
still it lags behind in the OECD countries ranking. This means that still much needs to be done
and minimum wage increments will help foster economic growth in Korea.
The purchasing power parity of the Korean consumers is too low compared to other nations such
Australia, United States and United Kingdom among others (Taylor and Taylor, 2014). This
means that Koreans can only purchase a few goods based on their level of income. The
purchasing power parity measures the value of a basket of goods across nations in monetary
terms. For example, comparing the purchasing power parity of Korea and Australia for the year
2017, the values were 6.7 and 11.3 respectively. This means that one can almost purchase two

KOREAN MINIMUM WAGE SUGGESTION BY PRESIDENT MOON EVALUATION 4
times a commodity in Australia than he would otherwise purchase it in Korea. This therefore
means that based on the current prices of goods and services in Korea, the Korean Citizens can
only purchase very little based on what they are paid. The prices in Korea are higher compared to
the minimum wage rates and hence it would be okay for the minimum wages to be raised
according to President Moon suggestion or even be raised higher. The minimum wages have
further been criticized by the fact that a worker being paid the minimum wage can only purchase
a newspaper and a packet of cigarettes after working for an hour. This therefore necessitates the
need for the minimum wages to be raised in order to raise the standards f living for the Korean
citizens.
The suggestion of President Moon to raise the minimum wages by 16 percent is right due to the
fact the government has promised to assist the small business to cater for the extra costs involved
due to the increase. Although the suggestion might have adverse effects on small businesses
which may force them to retrench some workers, the government has promised to assist them
with financial aids to cater for the worker’s increased pay. Small businesses can also cater for the
increased wages by raising their retail prices. Therefore the decision to raise the minimum wages
will be okay as the small businesses which most of times are affected by such decisions will be
assisted to meet part of hiked wage payments.
From the social welfare view, the social welfare system of Korea is weak. Most of the Korean
citizens depend much on the income they earn from their employers (Kwon and Holliday, 2017).
The suggested increment in minimum wages can only support a family of three to cater for their
basic needs and still be straining with nothing left for investment or even saving according to the
Korean Confederation of Trade Unions. It will thus be wise to increase the minimum wages to

KOREAN MINIMUM WAGE SUGGESTION BY PRESIDENT MOON EVALUATION 5
improve the living standards of the Korean citizens and enable them to live comfortably having
catered for at least all their basic needs.
It is also reasonable for the minimum wages to be hiked due to the fact that the wage rise may
actually increase employment. Many markets in Korea are composed of only a few firms. This
therefore means that from the monopoly market point of view which consists of only a few firms
in the market the rise in the minimum wages can actually raise employment rather than killing
jobs.
The hiking of the minimum wages motivates employees to work hard in their daily activities
(Seguino, 2016). When the minimum wages are raised, many employees are likely to work
harder as the grass becomes greener in order to match their productivity with their pay. This will
help to raise the general productivity in the entire economy and hence contribute much towards
economic growth.
In a nutshell, the suggestion by President Moon of hiking the minimum wages is okay as it is
more advantageous more so towards improving economic growth of Korea. The suggestion
should be implemented in order to improve the Korean citizens living standards and the economy
as a whole.
References
Chang, H.J., 2011. Korea: the misunderstood crisis. World development, 26(8), pp.1555-1561.
Kwon, S. and Holliday, I., 2017. The Korean welfare state: a paradox of expansion in an era of
globalisation and economic crisis. International Journal of Social Welfare, 16(3), pp.242-248.

KOREAN MINIMUM WAGE SUGGESTION BY PRESIDENT MOON EVALUATION 6
Moo‐Ki, B.A.I., 2012. The turning point in the Korean economy. The Developing
Economies, 20(2), pp.117-140.
Park, S.J., Lim, Y.S., Sams, S., Nam, S.M. and Park, H.W., 2011. Networked politics on
Cyworld: The text and sentiment of Korean political profiles. Social Science Computer
Review, 29(3), pp.288-299.
Seguino, S., 2016. The effects of structural change and economic liberalisation on gender wage
differentials in South Korea and Taiwan. Cambridge Journal of Economics, 24(4), pp.437-459.
Taylor, A.M. and Taylor, M.P., 2014. The purchasing power parity debate. Journal of economic
perspectives, 18(4), pp.135-158.