Korea's Minimum Wage Hike Sharpest in OECD
South Korea's minimum hourly wage this year is 8,350 won (US$7.17), seventh highest among 27 OECD countries, but the figure increases to 10,030 won (US$8.61), the highest in the OECD, when weekly holiday allowance is included, according to the data released by the Korea Economic Research Institute (KERI) on May 2.
The weekly holiday allowance system guarantees a certain day of paid leave when an employee works more than 15 hours a week under the Labor Standards Law. The latest survey excluded eight countries which do not have the minimum wage system, such as Norway, Denmark, Sweden, Switzerland, Austria, Italy, Finland and Iceland, out of the 36 OECD member states as well as Chile which does not have the standard for hourly wage conversion.
In particular, South Korea has raised the minimum wage by 29.1 percent over the past two years, the sharpest increase among OECD countries with US$30,000 (34.94 million won) of per capita gross domestic product (GDP), according to the survey conducted by the KERI.
In contrast, major advanced countries, including the United Kingdom, Germany, France and Japan, show a single digit increase over the same period and the United States has frozen the federal minimum wage since 2009. The average rate of increase among the 15 countries which have over US$30,000 (34.94 million won) of per capita GDP stands at 8.9 percent, one third of South Korea’s. Only Turkey and Lithuania show a higher rate of increase in minimum wage even among OECD countries which have less than US$30,000 (34.94 million won) of per capita GDP. The figure in Turkey was 43.9 percent, while that in Lithuania was 46.1 percent.
A KERI official said, “Recently, South Korea has sharply raised the minimum wage because President Moon Jae-in promised to increase the minimum hourly wage to 10,000 won (US$8.59) by 2020 during his campaign in 2017. Japanese Prime Minister Shinzo Abe also set the goal of accomplishing the average minimum wage across the country at 1,000 yen (US$8.97 or 10,442 won) as South Korea did, but it hasn’t shown a sharp increase unlike South Korea.” In fact, Japan has raised the minimum wage by 3 percent last year and 3.1 percent this year.
Accordingly, the minimum wage gap between Japan and South Korea has decreased from 1,830 won (US$1.57) in 2017 to 576 won (US$0.49) in 2019. KERI said South Korea’s minimum wage has actually surpassed Japan’s from last year considering the fact that Japan has no rules about weekly holiday allowance. It also said, “In determining the minimum wage rate, Japan takes into account companies’ ability to pay wages based on their amount of added values and ordinary income, together with the living expenses of employees and wages of temporary workers. On the other hand, South Korea does not include companies’ ability to pay wages in minimum wage determination.”