February 19, 2018 11:54
The International Monetary Fund has warned that a dramatic increase in minimum wage may lead to a deteriorating job market in Korea.
The warning came in a report released last week following its annual consultations with Korean officials on the country's economic developments and policies.
The IMF said that the recent increase in minimum wage in Korea was unprecedentedly high considering the economy’s productivity and inflation rate. The economy will continue to grow "with private consumption growth benefitting from the large minimum wage increase and from policies supporting employment and social spending," but a further increase could result in a spike in unemployment among young and unskilled workers.
Citing the case of France, which tried to reduce income inequality by rapidly increasing the minimum wage in the 1970s, the IMF said the European country later had to spend the equivalent of 1 percent of GDP to lessen the burden on employers.
It advised that the Korean government should increase the minimum wage "with care going forward, and any compensatory subsidy to small and medium-size enterprises should be temporary."
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