“If minimum wage exceeds 12,000 won, employees may be fired”…opinions are divided
Moderator : Anchor Na Kyung-cheol, Anchor Yoo Dawon
Contributor : Prof. Lee Jung-hwan, Hanyang University School of Economics and Finance
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◇Anchor> You’ve been talking about the minimum wage, and there’s a third meeting today, but some people are saying that the minimum wage should be raised to 12,000 won. The other side is saying that the self-employed will reduce employment, so there are conflicting arguments. Where is this background?
Lee Jeong-hwan> I think it’s because of the nature of the minimum wage. The minimum wage is literally the lowest wage. In fact, large companies or profitable companies already pay a lot of wages, so the so-called minimum wage system does not affect them. However, the self-employed, especially those who are in the restaurant business or service business, or small and medium-sized enterprises, are often less profitable and have to pay the minimum wage when they have to pay wages because of this.
So from the labor side, the minimum wage is the basic means to guarantee the cost of living, so recently, inflation has gone up a lot, so inflation has gone up a lot, so this year, we have to raise it from 9620 won to 12,200 won. We’re talking about a minimum wage that reflects this because inflation has increased so much.
But there are a lot of other researchers who are predicting that raising the minimum wage will end up hurting the self-employed, which is another vulnerable group, and small businesses, small businesses with less than five employees, because the high interest rates have actually been going on for a while, and they’re predicting that by September, the benefits of loan deferral and interest deferral due to COVID-19 will be gone.
And that’s going to put a lot of pressure on the self-employed and small businesses, and we’re hearing a lot of talk about how the minimum wage is going to go up a lot, and that’s going to really push the self-employed and small businesses over the edge and force them to close.
So they’ve been able to hold on, they’ve been able to hold on, they’ve been able to defer interest and things like that, so they’ve been able to keep their businesses active, they’ve been able to keep the self-employed active, and now that those benefits are going to be cut off, and what we call the aftermath of higher interest rates is usually a year or two down the road, so if that aftermath continues, the self-employed, especially. It’s a different discussion because the self-employed may close their businesses in some way and then hire fewer people and that effect may occur안전놀이터.
I think it’s a very different discussion because at the end of the day, the minimum wage is supposed to be a minimum standard of living that we can live on, and it’s supposed to be for small businesses and the self-employed. It is because of such a system that unprofitable companies or sole proprietors are affected a lot.
◇Anchor> Every time the minimum wage is discussed, the positions seem to go to extremes, but what do you personally think is the right level of minimum wage?
Dr. Lee> The OECD, researchers, and economists usually talk a lot about the median income because if the minimum wage goes up a lot, the median income is the income of the 50th person if there are 100 people in the whole country, the median income is the income of the 50th person, and if this becomes too narrow, the motivation to work decreases a lot.
If the gap between the median income and the minimum wage is too narrow, I don’t get paid even if I work hard, but I only get paid the minimum wage. Minimum wage markets also have a lot of flexibility, so if you have a convenience store part-time job or something like that, you can easily move in and out, and you can get unemployment benefits, so there’s less incentive to work, so we usually say that the right level is about 55% of the median income, and we were actually very low in the 2010s.
In the 2010s, it was half of what it is now, 4680 won, if you go back to 2010, it went down to 4300 won, and there was a lot of discussion that the minimum wage was very low, so there was a lot of discussion that it was not livable, so there was a lot of discussion that it should be raised, and now we usually talk about 62% of the median income, so I would say that it has gone up quite a bit, so actually, everyone agrees that the median income should go up.
It’s very desirable that as this income goes up, which we call the middle class, the middle class, that the minimum wage goes up with it, because if you raise the minimum wage a lot and the median income stays the same, you get a lot of economic distortions, you get a lot of so-called incentive problems, you get a lot of unemployment benefits, you get a lot of these social side effects, so we’re at a point now where we have to look at the minimum wage and the median income together because the minimum wage has gone up quite a bit.
From that point of view, we can say that the 62% level has gone up quite a bit in terms of economics, so how is the minimum wage going to go, and this is the story, but hasn’t there come a point where the minimum wage has to go up to reflect the inflation rate, which would have been about 15% in 2017 and 2018, and it’s hard to expect that now, and it’s better to structure economic policies so that the median income goes up a lot and the minimum wage goes up appropriately.
So far, the discussion has been about raising the minimum wage because it was too low, and it’s a very reasonable discussion, but I think we’re at a point where we need to analyze it more systematically, where we need to analyze the median income and the minimum wage and how we can raise it in a way that reflects inflation and things like that.