The South Korean government convened a cabinet meeting Monday to press ahead with voting for a revised enforcement ordinance of minimum wage law, which takes into account weekend allowances in setting the amount of minimum wage. Starting from Tuesday, furthermore, the minimum wage will rise 10.9 percent, and a body of statistical evidence suggests that the actual wage costs for small-sized enterprises or smaller business owners will surge by 33 percent.
Both the ruling party as well as the presidential office Cheong Wa Dae, however, painted a rosy picture about the economy. “The year 2019 will mark our shift towards a new economic paradigm which is centered around people,” said President Moon Jae-in during a meeting. "Thanks to the rise in minimum wages, our household income has increased as well." Lee Hae-chan, the chairman of the ruling Democratic Party of Korea, insisted that South Korea’s economic fundamentals were improving, despite the criticism from media. “Weekend allowances will add no burden to companies,” argued Hong Nam-ki, the minister of economy and finance and deputy prime minister of South Korea, along with other commanders of the nation’s economy.
Such self-praising notwithstanding, our small-sized business owners, who suffered an existential threat last year owing to a drastic surge in minimum wage, are welcoming the new year with reluctance as if on the brink of a financial free fall. Industry professionals are expressing grave concerns about a second wave of labor market shock and a spiking inflation. Many business owners are already speaking of cutting their manpower in half or closing their business altogether.
Both home and abroad, the circumstances surrounding the Korean economy have become much more dire than early last year. Globally, we are witnessing some of the major economies slowing down and their trade conflicts intensifying, while facing a set of issues internally such as weakening competitiveness of the country’s mainstay industries, sapping corporate investment, and falling productive population. If the direction of our economic policy continues to lurch towards politics and ideology, we might lose what little fuel we have left for our economic engine.
The government must rethink the pace for increasing minimum wage, and a discussion must be initiated swiftly enough on rescinding weekend allowances and reforming the wage system. Above all, President Moon should break loose from the trap of income-led growth and show an economic leadership that is both balanced and resolute.