President Moon Jae-in has offered a public apology for being unable to keep his campaign pledge to raise South Korea’s minimum wage to 10,000 won per hour “within three years.” Moon delivered the message through his chief of staff for policy, Kim Sang-jo, on Sunday. Last week, the minimum wage was decided to be raised by 2.9 percent to 8,590 won for next year.
Moon had promised to raise the wage floor to 10,000 won an hour by 2020 during his presidential campaign back in 2017. Given that the hourly pay was 6,470 won in 2017, the goal could have been achieved only if the pay had been raised by 54.6 percent for three years and by 18 percent for the next three years. This means the minimum hourly wage should have been raised by 19.7 percent for 2020, but this was almost impossible considering that the steep hikes of the minimum wage by 29 percent over the past two years have greatly impacted the economy. Though belated, the president’s acknowledgement of an apparent failure to keep his unrealistic pledge is a step in the right direction.
Kim admitted Sunday that the excessive hikes of the minimum wage have led to a burden for small business owners and employers. Yet, he stressed that the government is not abandoning or giving up on its signature income-led growth policy. The government will make continuous efforts to introduce more inclusive policies for the socially vulnerable and low-income earners including the Earned Income Tax Credit (EITC), unemployment allowances, and health insurances with increased coverage, Kim said.
No one would fiercely oppose such well-intended proposals aimed at enhancing social support and protection, but the policies need to be implemented at a proper pace and scale, taking into consideration the nation’s state coffers. As the minimum wage hikes have actually had a negative impact on employment and income of the socially vulnerable, a hastened introduction of other inclusive policies can cause serious side effects. For example, President Moon’s plan dubbed “Moon Jae-in Care” has been threatening the finance of social insurance companies as well as public health insurances.
It would not be easy for the Moon administration, which has just entered the third year of presidency, to officially acknowledge a failure of one of its key economic policies and announce an abandonment of the income-driven growth plan. However, the administration decides to run a thorough check on its own policies and make reasonable adjustments as needed, it will be widely considered to have made a brave choice.