Bottom-Rung Incomes Fall Despite Minimum Wage Hike

      May 25, 2018 12:40

      The average earnings of low-income households fell to the lowest level on record in the first quarter of this year despite a minimum wage hike that was supposed to help the working poor.

      At the same time the average income of the top one percent surged to a record high, casting doubt on government policies for more equitable distribution of wealth.

      Statistics Korea said Thursday that the average monthly income of households in the bottom 20 percentile plunged eight percent on-year in the first quarter to W1.29 million (US$1=W1,079).

      Kim Jung-ran at Statistics Korea said, "Due to the aging population, a large number of retired people ended up falling into the bottom rung, which brought down the overall figure."

      Prof. Hyun Jung-taik at Inha University said, "The minimum wage hike ended up only causing jobs to dwindle, stoking competitions for low-paying jobs mostly among part-time and non-regular workers. There are no signs that the situation will improve, and the deteriorating job market will cause the situation of low-income households to get worse."

      But the monthly income of the top one percent surpassed W10 million for the first time, up a whopping 9.3 percent on-year.

      The government says the figures reflect the aging society rather than damage from the minimum-wage hike. In March, the population of over-60s stood at 10.8 million, up by 520,400 compared to a year ago.

      An official at the Ministry of Strategy and Planning said, "A rise in the number of people over 60 who are retiring from work resulted in a natural decline in average incomes."

      The government also blames a decline in the number of Chinese tourists, which led to a slump in retail, lodgings and restaurants, and job losses in these low-paid sectors "appear to have worsened the distribution of incomes," according to the official. The government also cites slump in construction.

      Some economists disagree. "The aging population and economic slowdown have been a long-term trend for more than 10 years and cannot be cited as a cause of the sudden decline and growing income gap in quarterly figures," said Prof. Cho Joon-mo at Sungkyunkwan University.

      The increase in the minimum wage has certainly resulted in some losses of part-time jobs with small employers. Many small business owners who feel they cannot afford the hike have let people go or cut down on working hours, resulting in average wages of low-income households to drop.

      The number of temporary workers and day laborers, who were directly affected by the minimum wage hike, decreased by 95,000 and 16,000 on-year. The number of workers who work less than 17 hours per week increased by 13.3 percent to 154,800 in March from a year earlier. On the other hand, those who worked more than 54 hours decreased 10.6 percent.

      "The minimum wage hike that clearly shows that a well-intentioned policy does not necessarily produce good results," said Prof. Sung Tae-yoon of Yonsei University. "The policy aimed at helping low-income households has paradoxically ended up hurting them."

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