December 02, 2019 13:49
A total of 3.38 million workers were earning less than the minimum wage as of August this year, accounting for 16.5 percent of total workers. Both figures are record highs, according to Statistics Korea data.
The main reason was a steep surge in the minimum wage, which many small businesses believe they are unable to handle. The government raised the minimum wage this year by 10.9 percent to W8,350 (US$1=W1,180). That translates into a monthly salary of W1.75 million for a 52-hour work week.
The proportion of workers who make less than minimum wage surged from four to five percent in the early 2000s to 12.7 percent in 2009 following the global financial crisis and to 15.5 percent in 2018 and 16.5 percent this year. The bulk of underpaid workers are teenagers with 54.9 percent and the over-60s with 43.5 percent.
Employers who fail to pay minimum wage face up to three years in prison or a maximum W20 million fine, but even if an employer is caught, few are actually prosecuted if they manage to pay staff the difference or reach a settlement.
One labor official said, "As the minimum wage surged, we've seen a sharp increase in the number of violations. If we send out inspectors to the affected businesses, we find out about the difficult financial circumstances both employers and employees are experiencing, and we often return without taking any punitive measures."
Many part-time job ads for convenience stores on the Internet have the note saying, "Wage will be negotiated during interview." An industry insider explained, "Stores can't explicitly say that they can't pay the minimum wage, so they post such notes and jobseekers want to be hired anyway."
Experts say that the surge demonstrates the Moon Jae-in administration's policy of "income-led" growth has failed. The government tried to revive the sagging economy by raising the incomes of the poor, hoping this would prompt them to spend more, but it miscalculated and ended up making matters worse since many small employers laid off staff or cut hours.
The government implemented double-digit hikes in 2018 and 2019 to live up to President Moon's campaign pledge of boosting the minimum wage to W10,000 by 2020.
But faced with mounting complaints from small businesses, the government said it will raise the minimum wage only 2.9 percent next year, but experts believe even that is too high.
Choi In at Sogang University said, "The minimum wage is merely a mechanism designed to protect low-income workers, but no government has actually used it as part of economic policy. If more and more small businesses close down or cut hires because they can't pay minimum wage, low-income workers will lose their jobs and income disparity will only worsen."
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