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| Representatives of employer and labor groups attend the negotiations for next year's minimum wage at the Minimum Wage Commission office in Government Complex Sejong, Thursday. Yonhap |
By Yi Whan-woo
The soaring inflation is likely to prompt the labor circle to demand a sharper increase in the minimum wage, which employers fear could push costs further upward.
According to sources, Monday, the labor community is calling for the minimum hourly wage for next year to be raised by 29.5 percent to 11,860 won ($9.19) compared to this year.
"They are poised to make such a demand during a meeting of the Minimum Wage Commission," a source said, referring to a three-way commission composed of nine representatives each from the labor community, employer groups and the general public.
The commission usually determines the following year's minimum wage by the end of June.
Labor is expected to demand a 29.5-percent hike, after considering the higher-than-expected inflation and also the Yoon Suk-yeol administration's announcement last week to lower the maximum income tax rate for businesses to 22 percent from 25 percent.
"The labor side thinks that 11,860 won as the minimum wage is the least amount needed for workers with low-paid jobs to make a living," another source said.
Concerning the government's plan to slash corporate income taxes, the labor community anticipates that the market-friendly Yoon administration will saddle the corresponding financial burden on them and that a minimum wage hike is essential to minimum wage earners' survival.
On the other hand, employer representatives argue that a possible hike will worsen inflation and therefore want to freeze the minimum wage.
The country's monthly inflation hit 5.4 percent in May, after advancing at the fastest pace in nearly 14 years over steep rises in energy and commodity prices worldwide.
Under the circumstances, a Bank of Korea (BOK) report this month showed that the consumer price index (CPI), a measurement of changes in the prices of consumer goods, will inch up by 0.09 percent in the same year when the nominal wage rises by 1 percentage point and then by another 0.1 percent the following year.
The nominal wage is set against the CPI and is a barometer for real wages.
Funded by businesses, Korea Economic Research Institute said in a report that whenever the minimum wage increases by 1 percent, inflation will go up by 0.07 percentage points.
The finding suggests that inflation, forecasted to be in the 4-percent range in 2022, will rise by an additional 2.1 percentage points if the minimum wage is raised as demanded by labor groups.
Even if minimum wage is raised by half the level demanded by the labor side, inflation in 2023 is estimated to grow up to the 4-percent range, which will be higher than the 3 percent forecast by the Ministry of Economy and Finance and the 2.9 percent estimated by the BOK.
"High inflation is pushing the Korean economy to the brink of crisis. In that regard, stabilizing the minimum wage will be more critical than ever," an official from the business lobby group, the Korea Enterprises Federation, said.
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