The minimum wage in South Korea is set for its biggest increase since 2001, increasing by 16 per cent to 7,530 won next year.
The wage boost comes with a promise from President Moon Jae-in to be a “jobs president” and help the minimum wage to at least 10,000 won by 2020. It could prove to be a popular decision, as it is likely to affect 4.6 million employees, or 23.6 per cent of the workforce.
“For Korea, where the social welfare system is weak, workers are more dependent on income and a higher minimum wage is important from a human rights perspective,” Choi Pae-kun, an economics professor at Konkuk University in Seoul, told Bloomberg.
However, many employers have argued the minimum wage increase will be detrimental to job creation and bad for the economy in the long run.
The government has promised financial aid to help small businesses owners cope with the increased wages, suggesting there is a fund of around three trillion won to help SMEs.
"While there is social consensus for the need to increase the minimum wage, if it hikes too fast, the burden mainly falls on small business owners and could eventually lead to a reduction in new jobs," an official at the Korea Chamber of Commerce and Industry told the Korea Herald.
"It was a decision that ignored small and mid-sized businesses, which are already suffering from harsh economic conditions," said the Korea Employers Federation.
The increase falls somewhere in between the recommendations of labour advocates who had requested a 55 per cent boost and business representatives who suggested a more modest 2.4 per cent.
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