In South Korea, Employers Weigh Response to Higher Minimum Wage


Korean Win

After a review of 108 days, the Korean Minimum Wage Commission said July 16 that it planned to increase the minimum wage 7.2 percent in 2017. The wage would rise to 6,470 won ($5.69) from 6,030 won ($5.31)—a fourfold increase from 1,600 won ($1.41) in 2000.

Kim Ban-hee, who operates a fried-chicken restaurant in Goyang, South Korea, has five part-time employees and a few piece-rate delivery workers. But because of the planned minimum wage increase, Kim is considering laying off a few part-timers and hiring more delivery workers, who would be paid for each delivery rather than by the hour.

“My revenue has been flat while the amount of money I need to pay to employees increases,” Kim said. “If the minimum wage continues to increase, a small-business owner like myself will have to cut working hours on employees” to avoid violating the minimum wage law, she said, adding that she may have to eventually reduce business hours and hire only piece-rate workers. 

The new minimum wage would affect about 3.4 million South Korean employees in 2017, the minimum commission said. The percentage of the workforce affected by the new minimum wage would increase to 17.4 percent in 2017 from 2.1 percent in 2000, the commission said.  

According to annual wage condition report data collected by the commission, the percentage of South Korean employees who responded that they were paid less than minimum wage increased to 11.5 percent in 2015 from 4.3 percent in 2001.

Do Jun-woong, 24, a college student in Incheon, South Korea, said he received an offer in 2012 from a local convenience store to work part time, but declined after being told he would be paid 500 won (44 cents) less than the hourly minimum wage of 4,580 won.

“As a college student, working at a convenience store is one of the few ways to earn living expenses and cover tuition,” Do said. College students often choose low-wage work at convenience stores because of work-schedule flexibility, he said.

Under South Korean law, employers that fail to pay workers the hourly minimum wage could be fined up to 20 million won ($17,448) and up to three years in prison.  

The Korean Ministry of Employment and Labor conducts annual inspections to ensure businesses obey the minimum wage law. In 2015, the ministry inspected 19,791 employers and found that 1,432 violated the law. Nineteen cases were sent to the prosecutors, who penalized three businesses. The rest of the violators were told to pay back wages to affected employees.

Separately, a 2015 wage commission survey of 2.2 million employees found that 87 percent said they were paid less than minimum wage while working at businesses with fewer than 30 employees. Businesses with fewer than 50 employees in South Korea made up almost 97 percent of the business sector in 2014, a government report said.  

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Sean Na

Sean, a rising senior studying journalism at the University of Missouri, is an editorial intern for Bloomberg BNA’s Payroll Library publications.