If we define ‘work’ as ‘an act of receiving money from one`s labor’ most people would start working from the age of 20 when they become an adult. Their first career is mostly a ‘part time job’. Then why do people really ‘work’? Maybe, they would work to get what they want. They need money when they want to get what they want, so people work. The most important factor for working is probably ‘how much money they can get per hour’. We call it ‘hourly wage.’ The most important factor in determining the ‘hourly wage’ is the ‘minimum wage’. The minimum wage is a system where government intervenes in the process of determining the breadline between labor and management. In other words, they enforce employers to give more money to employees by making laws to protect low-wage worker. Businesses which employ more than 1 person should give more money than minimum wage to their employees. Because employers want to make the maximum benefit, they try not to give more money than minimum wage to their employees. Therefore, many people focus on the change of the minimum wage every year. The minimum wage has been increasing dramatically for the past 2 years. Let`s check what could happen from this change
1. Definition and purpose of the minimum wage system
In theory, the purpose of the minimum wage system is to ensure he breadline of wage level to workers to make their lives stable and to increase their quality of work to contribute to the development of national economy. Simply put, it guarantees the standard of living of workers by fixing the minimum wage which is given to workers by law. In doing so, workers can do their work with more motivation.
2. Change of the minimum wage past 10 years
The minimum wage didn`t show a dramatical increase in the past 10 years. If it showed an 8% (500 won) increase compared to last year, it would be a dramatical change. Sometimes, it only changes to 2% (100 won) increase a year. However, it increased rapidly in 2018. The minimum wage was 6,470 won in 2017, but it went up to 7,530 won in 2018.
It increased 16.4% compared to last year.
In addition, the minimum wage in 2019 will be increased to 8,350 won which is 10.6% increase compared with the past year. Because economists said that 10,000 won is the minimum wage that guarantee standard quality of life to people, the minimum wage would be showing considerable increase still ongoing.
3. Reason why the minimum wage increases every year
In plain words, prices go up every year. So, does the minimum wage. In detail, if the minimum wage increases, worker`s income also rises. Therefore, they can spend more money. Government induces workers consumption more than their income by increasing the minimum wage. This can also mean that the reason for the increase of the minimum wage is to circulate money. By doing so, it may relieve the gap between the rich and poor and reduce the social polarization.
4. Various opinions about increasing the minimum wage
Many people actively express their opinions about government policies, especially in economy field. This is because the fluctuation of financial currents influences their life directly. Increasing the rate of the minimum wage is closely related to the country`s economy that various people express their opinions. Let`s look at the stance about the increasing of the minimum wage.
4-1. Opinions of people who agree about increasing of the minimum wage
As a result of research, an investigation of 1,000 people from 20 to 60 about increasing of the minimum wage, 73.2% of respondents said that it would be uncomfortable, but is essential for the future. They expect this increasing rate can be big help to the country`s economy from a long-term perspective even though the burden of individual business or small business can be bigger for a while. We can summarize their opinions into three ideas. First, increasing of the minimum wage is natural. Second, there is no reason that increasing of the minimum wage decreases the employment as shown in abroad cases. Third, economy grows when consumers’ economic base is strong. Therefore, small businesses can attain benefits if the minimum wage increases. People who agreed on the increasing of the minimum wage supported their opinion with these three ideas.
4-2. Opinions of people who disagree about increasing of the minimum wage
Workers of individual businesses and small businesses incur the greatest harm when the minimum wage increases. Many individual businesspeople or professional workers who answered the questionnaires, showed negative attitudes toward the increasing of the minimum wage. 70% of the respondents of smaller business agreed with them. We can summarize their opinion into three ideas. First, if the minimum wage increases a lot, prices rise a lot together, so spending would become larger. Second, the job market could be reduced. If the minimum wage increases, employers could find hiring more employees difficult to afford. Therefore, they can fire the workers or reduce their work time. Third, pressure on existing workers could increase. These are the opinions of people that disagree.
5. Positive effects about the increasing of the minimum wage
Korean workers with low-salary comprise 23.5%, which is a lot higher than average of 20 countries in OECD (17.3%) and Korea ranked 3rd. in the phenomenon of high percentage of low-paid people means that their quality of life is also bad. Through the increase of the minimum wage, low-paid people`s life can be more comfortable. Also, we can raise their real income with minimizing unemployment period.
6. Negative effects about the increasing of the minimum wage
If the minimum wage increases, negative effects also occur. Personal expenses and inflation are examples of negative effects. In 2018 after the minimum wage rapidly increased, ‘delivery charge’ was adopted in Korea. Until 2017, restaurants hadn`t received delivery charges unless the place is too far away. This happened as a result of increase in minimum wage. As the minimum wage increased, the personnel expenses rose. Therefore, restaurant needed to receive some delivery charge. Many economists said that this is just a start. They said that as minimum wage increased, more expedient will be used by business owners to make additional profits. Eventually this will bring negative results to us.
7. How the increasing of the minimum wage affects our life in future
In the 21th century, the minimum wage has risen over 10% than the past year, and it only happened three times (2002, 2006, 2018). In 2002 and 2006, Korea was in an economic boom, so the employment rate increased anyway, regardless of increasing of the minimum wage. However, at the beginning of the 2010s, the economic structure of Korea became different from the past. It was going to become more similar to other advanced countries. A low birth rate and an aging society became a serious issue. Also, some industries that were once leaders slowly began to be left behind by competition in countries like China. Jobs naturally decreased and an economic recession also became worse. In 2017, inflation rate was 1.9% and it was the first time in Korea as inflation rate always kept 2~3% and never dropped to 1%. This was a signal of deflation. If consumption shrinks, investment of companies would decrease, and production would be reduced. Then, jobs would only decrease in the end.
In the long term, the increasing of the minimum wage is essential for adjusting the middle class and low-income people. However, Korea`s current situation isn`t prepared enough for the potential negative effects. Therefore, from a micro view, economists said that we can have high risk in the following few years. < Copyright © The Gachon Herald All rights reserved >
Nowadays, many countries are trying to increase the minimum wage, because although they might be damaged in short term, in the long-term, it can solve both economic and social problems. However, the reality is that Germany is the only country that makes benefits from increasing the minimum wage. Other countries are reluctant to adopt this method, because if they increase the minimum wage, it could bring huge damage in short term and probability of failure is very big. It is hard to evaluate Korea`s increase of minimum wage to be beneficial or not, because only 1 year has passed since then. For now, negative effects such as the increase in unemployment of low-income people, public debt and pressure for small business people are increasing. It seems to be bigger than the actual benefits like low-income people`s income increase and better economy vitalization.
Most people who read this article may welcome the increasing about the minimum wage. Because they are people who receive the wage, not the ones who give them. Sometimes, I wish people to think about the opposite position; also, comparing the long-term and short-term effects about it. Now, think again, do you welcome the increase of the minimum wage?