January 09, 2018 13:18
The number of job postings on the state-run employment website plunged to 208,000 last month, a 17-percent decline compared to the same period of 2016 and the biggest drop in December in the past decade. It had been rising steadily over the past five years, until reaching a cliff last month.
The website is popular among small and mid-sized companies, and the decline is the clearest proof yet of how devastating the Moon Jae-in administration's hasty minimum wage hike has been for them. They simply cannot afford to hire any more.
A growing number of small restaurants are turning to self-service to cope with surging wages, while more and more corner stores are laying off part-time staff while the owners themselves man the till. Business like restaurants and beauty salons that rely heavily on part-time staff are left with few choices other than raising prices. The repercussions are being felt across the country.
Yet the government is turning a blind eye. Ministers visited a busy street in downtown Seoul lined with restaurants and told owners not to lay off staff simply because of financial difficulties. No doubt they were impressed by this helpful advice. Tinkering with market principles only ends up harming the weakest constituents.
The government has promised to tap into tax revenues to distribute W3 trillion to small business owners who are struggling to stay open due to the hike (US$1=W1,069). Already, some owners have started to split their companies to net more subsidies. Others are cutting bonus payments to cope with the wage hike. The government has put together a task force to monitor developments, but how can it check up on every business across the country? This is just a publicity stunt.
Moon now admits that "some small businesses may experience difficulties over the short term or cut back on new hires," but added, "The minimum wage hike is a policy that must be pursued."
The repercussions will last for some time. Raising the minimum wage to W10,000 by 2020 as planned would increase the financial burden on businesses by another W81 trillion. Small businesses will have to close down, layoffs will become rampant, and consumer prices will go through the roof. What Koreans need is jobs, and all policies must strike a balance that allows this to happen. The government must get its head out of the sand.
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