Illustration. Photo: Bloomberg/Getty Images.
Federation of Korean Industry (FKI) on May 26 said, minimum wage In Korea, which is among the highest in the world and the salary growth rate is also relatively fast, it is necessary to consider adjusting the salary growth rate and consider avoiding negative side effects.
According to the Vietnam News Agency correspondent in Korea, relevant statistics from the Organization for Economic Co-operation and Development (OECD) cited by FKI show that the ratio of the minimum wage to the average salary of Korea ( (based on 2020 figures) is 49.6%, ranking 3rd out of the 30 OECD countries surveyed.
In the period from 2016 to 2021 alone, the minimum wage in Korea has increased by 44.6%, 4 times higher than the average of the G5 group (USA, Germany, France, UK, Japan) when it increased by only 11 .4%. Among the G-5 countries, the UK experienced the largest minimum wage increase over the past five years, reaching 23.8%, followed by Japan with 13%, Germany 12.9%, France 6% and USA 0%.
Affected by the rapid increase in the minimum wage, the percentage of Korean workers whose income does not meet the minimum wage standards is also higher than that of the countries listed above. In 2020, up to 15.6% of workers in South Korea earn less than the minimum wage, much higher than Japan with 2%, the UK 1.4%, Germany 1.3% and America with 1.2%.
FKI pointed out that as the hourly productivity of Korean workers increased by 11.5%, the corresponding minimum wage increased by 44.6%. Compared to the actual productivity improvement, the rate of increase of the minimum wage in Korea is too fast. Accordingly, the problem is that there will be negative consequences when the minimum wage is raised unreasonably, such as working time is reduced.
FKI pointed out that the sharp increase in the minimum wage in the past 5 years has created too much pressure on companies and businesses. In particular, when considering 3 main risk factors such as: Escalating prices, high exchange rates and rising interest rates along with the deterioration of the business environment due to the COVID-19 pandemic, experts see that the solvency of companies is very weak.
Chu Kwang-ho, head of FKI’s economic division, added: “Korea’s minimum wage standard is currently among the highest in the world. Due to a number of factors of economic uncertainty still exist. Therefore, the difficulties of small and medium enterprises (SMEs) with weak solvency will become more and more serious”.
Accordingly, the FKI proposes that minimum wages should be applied on a sector-specific basis, taking into account region, age, productivity and work intensity in the same way that the United States, Japan and other developed countries do. establish minimum wage standards. Earlier, South Korean President Yoon Suk-yeol made the proposal as a pledge that “minimum wages will be applied differently by industry”. The Korea Minimum Wage Commission also said it would discuss whether to apply this option at its third plenary meeting scheduled to take place on June 9.
Mr. Chu Kwang-ho added: “We should adjust the minimum wage growth rate by considering the aggregate economic growth rate and wages of all workers. In addition, it should be applied. standards vary by industry and region, specify special occupations in terms of minimum wages, abolish weekly benefits or fall within the minimum wage range.
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