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Are Moon's labor policies failing?

Members of Incheon International Airport Corp.'s union hold up signs opposing the state-run firm's plan to directly hire contract security workers, as part of a protest against the move in front of Cheong Wa Dae, Thursday. / Yonhap
Members of Incheon International Airport Corp.'s union hold up signs opposing the state-run firm's plan to directly hire contract security workers, as part of a protest against the move in front of Cheong Wa Dae, Thursday. / Yonhap

By Kim Bo-eun

Questions are arising over the Moon Jae-in administration's labor policies to raise the minimum wage and grant regular worker status to subcontracted workers, at a time when the job market is frozen amid the COVID-19 pandemic.

These are two of Moon's key labor policy election pledges ― to raise the minimum hourly wage to 10,000 won ($8.35) and normalize employment for irregular workers. The measures are intended to help reduce Korea's wealth gap and improve employment conditions for people who face job instability. The minimum wage hike was also part of a larger plan to drive income-led growth.

Each year, a panel representing the government, labor and management convene to decide on the minimum wage level for the following year. The tripartite panel votes on multiple proposals, and government representatives play a role in reaching a decision.

While the rate of increase for the minimum wage for 2020 from the previous year was the lowest at 2.9 percent, the wage has continued to rise. It has spiked since Moon took office, from 6,470 won in 2017 to 7,530 won in 2018, 8,350 won in 2019 and 8,590 won this year.

Members representing labor have called for the minimum wage for next year to be raised to as much as 10,770 won, citing the hike is necessary for the government to fulfill Moon's pledge. This is a 25.4 percent hike from 8,590 won this year.

Members representing management are calling for the wage to be frozen or cut, as small businesses in particular are facing difficulties amid COVID-19. They proposed a system that applies different levels of minimum wage according to sector, but this was dismissed after labor representatives voted against the plan on Monday.

The panel is set to begin discussions on the wage level today.

Deputy Prime Minister Hong Nam-ki earlier implied that the government would not push for an increase in the minimum wage for next year, considering current circumstances. However, there is criticism that Moon's pledge to raise the minimum wage to 10,000 won was unrealistic to begin with.

Possible side effects of raising the minimum wage are businesses reducing hiring, which would not benefit workers.

Some experts point out that raising the minimum wage does not benefit the most vulnerable in the labor market, who face layoffs or are looking for a new job.

Data from the Korea Economic Research Institute shows the rise in the minimum wage led to a reduction in jobs for low-wage workers. According to the research institute, 30 percent of those who lost minimum-wage jobs had lost their jobs due to the surge in wage level.

The unemployment rate surged to 4.5 percent in May, the highest in 10 years, as the coronavirus took a toll on the job market. The number of employees dropped by 392,000 to 26.93 million in May, in the third consecutive monthly decline.

Meanwhile, the Incheon International Airport Corp.'s plan to directly hire 1,900 contract security workers has stirred massive controversy, especially among young jobseekers.

They contend that it is unfair that the contract workers get to become regular workers at the much-desired state-run corporation. Competition rates to enter the public agency is high, as it promises job stability and decent pay. In some cases, jobseekers prepare for several years to join the firm.

A petition on the presidential office's website urging the IIAC to suspend its plan has gathered more than 260,000 supporters in a week since June 23.

Polarization still exists between regular and contract workers, despite government efforts over the years.

An official at the state-run Korea Labor Institute conceded that the move by Incheon International Airport Corp. to directly hire contract workers may not have been the best way to carry out the government's policy.

"The policies have been well-intended, but the latest plan of the IIAC appears to have been devised in a way that escalates social conflict," an official heading the employment policy division said.

"In the case of the minimum wage, an excessive hike would not be feasible under current economic circumstances."


Members of Incheon International Airport Corp.'s union hold up signs opposing the state-run firm's plan to directly hire contract security workers, as part of a protest against the move in front of Cheong Wa Dae, Thursday. / Yonhap
Members of Incheon International Airport Corp.'s union hold up signs opposing the state-run firm's plan to directly hire contract security workers, as part of a protest against the move in front of Cheong Wa Dae, Thursday. / Yonhap

By Kim Bo-eun

Questions are arising over the Moon Jae-in administration's labor policies to raise the minimum wage and grant regular worker status to subcontracted workers, at a time when the job market is frozen amid the COVID-19 pandemic.

These are two of Moon's key labor policy election pledges ― to raise the minimum hourly wage to 10,000 won ($8.35) and normalize employment for irregular workers. The measures are intended to help reduce Korea's wealth gap and improve employment conditions for people who face job instability. The minimum wage hike was also part of a larger plan to drive income-led growth.

Each year, a panel representing the government, labor and management convene to decide on the minimum wage level for the following year. The tripartite panel votes on multiple proposals, and government representatives play a role in reaching a decision.

While the rate of increase for the minimum wage for 2020 from the previous year was the lowest at 2.9 percent, the wage has continued to rise. It has spiked since Moon took office, from 6,470 won in 2017 to 7,530 won in 2018, 8,350 won in 2019 and 8,590 won this year.

Members representing labor have called for the minimum wage for next year to be raised to as much as 10,770 won, citing the hike is necessary for the government to fulfill Moon's pledge. This is a 25.4 percent hike from 8,590 won this year.

Members representing management are calling for the wage to be frozen or cut, as small businesses in particular are facing difficulties amid COVID-19. They proposed a system that applies different levels of minimum wage according to sector, but this was dismissed after labor representatives voted against the plan on Monday.

The panel is set to begin discussions on the wage level today.

Deputy Prime Minister Hong Nam-ki earlier implied that the government would not push for an increase in the minimum wage for next year, considering current circumstances. However, there is criticism that Moon's pledge to raise the minimum wage to 10,000 won was unrealistic to begin with.

Possible side effects of raising the minimum wage are businesses reducing hiring, which would not benefit workers.

Some experts point out that raising the minimum wage does not benefit the most vulnerable in the labor market, who face layoffs or are looking for a new job.

Data from the Korea Economic Research Institute shows the rise in the minimum wage led to a reduction in jobs for low-wage workers. According to the research institute, 30 percent of those who lost minimum-wage jobs had lost their jobs due to the surge in wage level.

The unemployment rate surged to 4.5 percent in May, the highest in 10 years, as the coronavirus took a toll on the job market. The number of employees dropped by 392,000 to 26.93 million in May, in the third consecutive monthly decline.

Meanwhile, the Incheon International Airport Corp.'s plan to directly hire 1,900 contract security workers has stirred massive controversy, especially among young jobseekers.

They contend that it is unfair that the contract workers get to become regular workers at the much-desired state-run corporation. Competition rates to enter the public agency is high, as it promises job stability and decent pay. In some cases, jobseekers prepare for several years to join the firm.

A petition on the presidential office's website urging the IIAC to suspend its plan has gathered more than 260,000 supporters in a week since June 23.

Polarization still exists between regular and contract workers, despite government efforts over the years.

An official at the state-run Korea Labor Institute conceded that the move by Incheon International Airport Corp. to directly hire contract workers may not have been the best way to carry out the government's policy.

"The policies have been well-intended, but the latest plan of the IIAC appears to have been devised in a way that escalates social conflict," an official heading the employment policy division said.

"In the case of the minimum wage, an excessive hike would not be feasible under current economic circumstances."


Kim Bo-eun bkim@koreatimes.co.kr

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