By Yoon Ja-young
The government will inject nearly 3 trillion won to lessen the burden on small businesses following a sharp minimum wage hike scheduled for next year.
The government announced Thursday it will subsidize up to 130,000 won a month per worker to lessen the burden on employers following the minimum wage hike. This applies to employees of small businesses — with less than 30 workers — who earn less than 1.9 million won a month.
Foreign workers, those working less than 15 hours a week, and security guards or janitors hired by apartment residents will also be eligible for the subsidy. Employers who earn more than 500 million won of taxable income, or owe overdue wages to employees, or are already getting government subsidies for wage payments, however, will have to finance the minimum wage hike on their own.
Following President Moon Jae-in’s campaign pledge to raise the minimum wage to 10,000 won per hour by 2020, it will be raised by 16.4 percent next year, reaching 7,530 won per hour.
The government will be subsidizing 581 won out of the 1,060 won raised next year, injecting 2.97 trillion won.
“For income-led growth, improving earned income is more crucial than anything else. The minimum wage hike will be a starting point,” Finance Minister Kim Dong-yeon said.
The Moon Jae-in administration has been focusing on increasing household income, thereby hoping to expand consumption and boost the economy.
“Income polarization between workers and the corporate sector as well as between households is so serious that it shouldn’t be left as it is,” Kim said. “Income polarization is weighing on growth as well, as it is hindering domestic consumption.”
He said increasing income for low-income households will spur consumption, helping growth. It can also add to growth potential in the medium to long term by expanding human capital investment by the less privileged, according to the minister.
While experts agree low income hinders consumption, there have been concerns the steep hike will deal a blow to small businesses and merchants. Some have also pointed out the steep hike will end up decreasing jobs. Labor Minister Kim Young-joo said the funding will lessen the burden on small employers and stabilize employment.
Funding for the minimum wage hike will be temporary. However, the government plans to come up with measures for a soft landing of the hike in the latter half of next year, taking into account the economic situation.
However, the opposition parties are criticizing the government subsidy. The main opposition Liberty Korea Party estimates it will take 50 trillion won over the next five years if the minimum wage is raised as planned.
On top of subsidizing the minimum wage hike, the government plans to lessen the social insurance burden on employers so more workers can benefit from social insurance coverage.