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Finance minister calls for business to refrain from excessive wage increase

Finance minister calls for business to refrain from excessive wage increase

Posted June. 29, 2022 07:53,   

Updated June. 29, 2022 07:53


Choo Gyung-ho, the Deputy Prime Minister and the Minister of Economy and Finance, urged the country’s business leaders not to make excessive wage increases. With the fear over “6-percent inflation rate” close to becoming reality, it appears the government is making a move to preempt an inflation crisis triggered by wage spikes. Against this backdrop, the labor sector lashed out while labeling it as a government intervention.

During a meeting with the senior leadership of the Korean Enterprises Federation on Tuesday, Minister Choo called for a reasonable amount of wage adjustments, considering the economic difficulties the country is faced with. While stressing the fact that wage must be determined upon through talks between labor and management, the deputy prime minister expressed his concerns that an excessive wage increase might worsen the sense of frustration of financially vulnerable workers and exacerbate social conflicts by broadening the wage gap between larger enterprises and smaller businesses.

In fact, there are signs of wage spikes among large business organizations, with some of them pursuing a plan on around a 10-percent wage increase. In the first quarter of the year, the wage of small-and medium-sized enterprises was 50.6 percent against that of larger businesses, falling from 59.4 percent of last year.

Mr. Choo emphasized the need to minimize the impact of wage increase to tame the surging inflation. “Rising prices lead to rising wage, and the higher wage fuels the inflation in return,” he said after the meeting was over. “Once a wage inflation spreads among IT businesses and larger enterprises, it would be intractable. All the efforts to stabilize the inflation can be instantly wiped out.”

“Businesses are also aware of such a risk, so we will make a proactive effort to address the challenge,” said Chairman Son Gyung-sik of the Korean Enterprises Federation. He also proposed some ideas such as regulatory reforms strong enough to be felt by the businesses, labor reforms to lift the restriction on dispatched workers, and tax reforms to lower the ceiling of inheritance taxes.

Hee-Chang Park ramblas@donga.com · Ae-Jin Ju jaj@donga.com