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Auto Industry Weighed down by Minimum Wage Act Amendment
Hurting Int’l Competitiveness
Auto Industry Weighed down by Minimum Wage Act Amendment
  • By Jung Suk-yee
  • December 28, 2018, 10:36
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With the Minimum Wage Act amendment, Korean automakers’ annual labor cost burden is expected to increase by at least 700 billion won (US$630 million).

South Korean automakers are revolting against the government’s proposal to revise the enforcement decree for the Minimum Wage Act, arguing that it would increase labor costs by 700 billion won (US$630 million) a year and adversely affect their business.

The Korea Automobile Manufacturers Association and the Korea Auto Industries Cooperative Association issued a joint statement on Dec. 27, claiming that the amendment is problematic in that it proposes a new minimum wage calculation method that effectlively forces many companies to further raise their already high wage levels.

According to the associations, even Hyundai Motor Company, where newly hired college graduates’ average annual salary exceeds 50 million won, would have to increase the salaries of more than 7,000 employees next year once the amendment is implemented. In addition, local auto parts manufacturers, which are in poor financial conditions and much smaller than the automaker, would have to increase their employees’ salaries or change their wage systems in order not to be punished for violating the new minimum wage calculation method.

“If the calculation method is changed in accordance with the amendment, local automakers’ annual labor cost burden will increase by at least 700 billion won, and then their international competitiveness will deteriorate,” the associations asserted, adding, “As for auto parts manufacturers, a skyrocketing financial burden will threaten their survival in addition to the previous expansion of the scope of ordinary wages and the 30% increase in minimum wage that has occurred within two years.”

The associations criticized the six-month grace period given by the ministry, too. “The ministry is telling companies to deal with the matter by changing their wage systems, and this is nothing but a burden shifting,” they said, continuing, “The wage systems at companies have been implemented for a long time based on agreements between workers and employers and, as such, the systems cannot be changed in as short as six months as evidenced by the fact that many companies in the industry have failed to reach a labor-management agreement after years of discussions for the same change.”

According to the associations, the Ministry of Employment and Labor is abusing its power in pushing ahead with the bill. “The Supreme Court has repeatedly ruled against the ministry’s guidelines for including paid holidays in minimum wage calculation, yet the ministry is still sticking to the guidelines,” they mentioned, adding, “The matter should be treated based on legislation, not the ministry’s own arbitrary guidelines.”