Minimum wage rises, but the bigger fight is over who pays

South Korea’s decision to raise the hourly minimum wage by 3.7 percent to 10,700 won ($7.19) immediately drew familiar criticism from both labor unions and business groups following the Minimum Wage Commission’s vote Tuesday night.

But this year’s negotiations again raised a broader question over whether the minimum wage alone can protect low-income workers without placing disproportionate pressure on small business employers.

Korea has increasingly relied on the minimum wage as a tool of social protection, leaving workers and small businesses, both under financial strain, to argue over who should bear the cost.

The Korea Federation of Micro Enterprise issued a statement shortly after the decision, warning that the increase would add to the burden on struggling small businesses.

“The increase will raise the effective hourly labor cost to 12,840 won, including the weekly paid holiday allowance, and the monthly wage to 2.24 million won,” the federation said.

Under Korea’s Labor Standards Act, employees who work at least 15 hours a week are entitled to a paid weekly holiday, requiring employers to pay an additional day’s wages each week.

“For small businesses already facing an unprecedented crisis, the increase will become another heavy burden, adding to labor costs and further worsening management conditions,” the federation said.

Korea had one of the highest shares of self-employed workers among advanced economies in 2023, at 23.2 percent. Government data also show that the number of business closures has risen every year since 2021, reaching 1,007,650 in 2024.

Labor unions, meanwhile, argued that wages have failed to keep pace with living costs.

The average price of lunch in 12 major commercial districts in Seoul, Incheon and Gyeonggi Province reached 11,583 won last year, exceeding next year’s minimum hourly wage.

“The average increase in the minimum wage over the past three years was only 2.37 percent, below the average inflation rate of 2.67 percent,” the Korean Confederation of Trade Unions said. “This year’s increase falls far short of recovering workers’ accumulated losses in real wages.”

The annual deadlock has also blocked changes to the system, although labor and management want reform in sharply different directions.

Labor representatives argued that the minimum wage should cover workers in newer forms of employment, including platform workers and couriers. Many work under the direction of companies but are legally classified as self-employed and remain outside the system.

Employers renewed calls for different minimum wages by industry or region, arguing that businesses face widely varying labor costs and economic conditions and should not all be subject to a single nationwide rate.

Neither proposal advanced amid opposition from the other side.

In a statement issued after the negotiations, the commission’s public interest members acknowledged that the same disputes had repeatedly failed to produce meaningful change.

“As society and the economy undergo rapid transformation, similar debates have been repeated year after year during the minimum wage review process without producing meaningful progress,” they said.

They called on the Ministry of Employment and Labor to establish a task force to review the scope and criteria of the minimum wage system and present recommendations before next year’s negotiations.

Some experts argue that the commission itself should be restructured to reduce repetitive confrontations and give greater weight to economic evidence.

“The same exhausting confrontation repeats every year because the commission is expected to solve problems that extend far beyond wage-setting,” said Park Ji-soon, a professor at Korea University Law School.

He said decisions should be driven more by objective evidence than by entrenched political or ideological positions.

Yet changing the commission would not resolve the underlying conflict over who should pay for higher living standards.

Kwon Soon-won, chair of the commission, said the burden should not fall almost entirely on small business employers. He argued that the government and large companies should play a greater role in supporting small firms and low-paid workers.

“Large companies such as Samsung Electronics and SK hynix employ many workers at subcontractors and small firms providing cleaning, maintenance and other services. They also contributed to those companies’ performance,” Kwon said.

“There should be more room for government support so that businesses can improve while workers’ livelihoods also improve, rather than relying almost entirely on the minimum wage,” he added.