The South Korean government has set up a job stabilization fund to ease the impact of a sharp hike in the minimum wage on small and medium-sized companies. The government provides up to a 130,000 won per worker from this fund for small businesses employing fewer than 30 workers..
Yet the job fund has failed to serve its intended purpose. Following the hike in the minimum wage, employment conditions have deteriorated, while income inequality has widened. Critics are pointing out that the government is wasting taxpayers’ money on its ill-advised income-led growth experiment.
According to the Ministry of Strategy and Finance, the job stabilization fund has paid a total of 450 billion won (US$405 million) to small businesses so far, only 16% of the government’s target, which is set at 3 trillion won. The number of applicants totaled 2.36 million, 84% of the government’s estimate. The budget execution rate is still low even though five months have passed since the establishment of the fund. “The executed budget will increase at a fast pace based on retroactive application to belated application,” the ministry explained, adding, “Approximately three trillion won (US$2.7 billion) is likely to be fully executed within this year.”
Still, few people are actually feeling the effect of the job fund. According to Statistics Korea, the average monthly labor income of households in the lowest 20% income bracket stood at 472,900 won (US$425) in the first quarter of this year, down 13.3% from a year earlier. Likewise, that of the second-lowest income bracket fell 2.9% to 1,504,700 won (US$1354). In other words, the job fund rarely flowed to low-income workers.
The job fund’s effect on employment is not clear yet, either. In the lodging and food service industry, which is highly vulnerable to a minimum wage hike, the number of new employees decreased 28,000 last month, falling for the 11th consecutive month.