Labor, management reach first wage deal since 2008

South Korea’s minimum wage for next year has been set at 10,320 won per hour, a 290-won increase from this year. When converted to a monthly wage, it amounts to 2,156,880 won. The 2.9 percent rise is the lowest first-year increase under any administration except for 2.7 percent in 1998 during the financial crisis under President Kim Dae-jung.

Notably, this is the first time since 2008 that the wage was determined through mutual agreement among labor, management, and public interest representatives, without a vote. The rare consensus reflects a shared recognition of the country’s difficult economic conditions, which the government has described as resembling a "second IMF crisis."

The path to agreement was difficult. Last month, labor and management submitted sharply differing proposals: a 14.3 percent increase and a wage freeze, respectively. After several rounds of discussion without consensus, public interest representatives proposed a compromise range of 10,210 to 10,440 won. Although labor members recommended by the Korean Confederation of Trade Unions walked out in protest, those backed by the Federation of Korean Trade Unions remained and continued negotiations. Following two additional rounds of revised offers, the sides settled on a final figure without requiring a vote.

The minimum wage set during the first year of a new administration is often seen as an indicator of its broader labor policy direction. Progressive governments such as Moon Jae-in’s and Roh Moo-hyun’s posted higher first-year increases of 16.4 percent and 10.3 percent, respectively. By contrast, conservative leaders like Park Geun-hye, Lee Myung-bak, and Yoon Suk-yeol oversaw more modest hikes. This year’s 2.9 percent increase under a progressive administration reflects restraint. The presidential office said the decision factored in objective data and the challenges faced by vulnerable workers and small business owners. It added that, since the outcome was the result of mutual understanding and compromise, it would be fully respected.

Despite the modest increase, small businesses remain concerned. After years of rising labor costs, many are already under severe pressure. Last year, the number of business closures exceeded one million for the first time. Policymakers are being urged to introduce measures that ease burdens on small firms and improve the overall business climate.

While this year’s agreement marks a meaningful development, experts say the minimum wage system itself needs reform. The current process has often been characterized by intense conflict and low public confidence. Kim Young-hoon, nominee for Minister of Employment and Labor, remarked that the system is “exhausting” and lacks broad social acceptance. The minimum wage serves as a benchmark for government policies tied to 26 different laws, including unemployment benefits and parental leave. Observers say a more rational and transparent framework is needed, one that reflects objective indicators and takes into account differences by industry and region.