KEF sets 3.5% as wage hike guideline this year

A local business group has suggested 3.5% as the guideline for wage hikes this year, a sharp contrast to the 12% increase rate labor unions are seeking. The Korea Employers Federation (KEF) announced at a meeting of its chairmen at the Chosun Hotel Thursday that in setting the wage guideline, it took into account the economic growth rate, the financial status of local enterprises and their level of productivity.

The meeting participants also agreed that companies placed under court management, ``workout`` programs or court mediation and those that suffered long-term losses should freeze workers` wages at last year`s level.

They decided not to apply the wage guideline to workers under the annual salary system. Instead, they announced their determination to introduce a merit-based salary system.

Meanwhile, the Korean Confederation of Trade Unions (KCTU) denounced the KEF move, saying that workers` wages dropped sharply during the economic crisis of 1997-98 and that despite the subsequent economic recovery, their pay has not yet reached an appropriate level. The Federation of Korean Trade Unions (FKTU) and KCTU earlier proposed wage increase rates for this year of 12% and 12.7%, respectively.

Ha Im-Sook artemes@donga.com