Next year's minimum wage has been finally decided at KRW 10,320 per hour (monthly equivalent: KRW 2,156,880), a 2.9% increase from this year. This figure marks the lowest increase rate for the first year of any administration, excluding the Kim Dae-jung government during the IMF Asian financial crisis. This agreement was reached after intense debate between labor and management, amidst challenging economic conditions. Notably, this decision is significant as it's the first time since 2008 – 17 years ago – that the minimum wage has been agreed upon by labor, management, and public interest representatives.

Minimum Wage Decision Process and Key Issues 

The final proposal for next year's minimum wage was approved at the 12th plenary session of the Minimum Wage Commission, held on the 10th at the Government Complex Sejong. The labor sector initially proposed KRW 11,500, while the management sector suggested KRW 10,030, showing a significant disparity.

During the previous meeting, public interest members proposed a deliberation facilitation range (mediation proposal) between KRW 10,210 (1.8% increase) and KRW 10,440 (4.1% increase). The lower bound reflected the projected consumer price inflation rate for 2025, while the upper bound combined the projected national economic productivity growth rate for this year (2.2%) with the cumulative difference between the consumer price inflation rate and minimum wage increase rate from 2022 to 2024 (1.9%).

Discussions on the minimum wage were tense from the outset. The labor sector emphasized the decline in real wages due to high inflation and the difficulties faced by ordinary citizens, demanding a substantial increase. In contrast, the management sector argued for a freeze or a small increase, citing economic slowdown and increased burden on businesses. Small business owners and SMEs, in particular, stressed that a minimum wage hike could lead to job cuts, advocating for a cautious approach.

Role of FKTU Amidst KCTU's Walkout 

Towards the end of the meeting, labor representatives from the Korean Confederation of Trade Unions (KCTU) strongly protested the deliberation facilitation range proposed by the public interest members, calling it a "deceptive proposal that disregards the lives of workers," and walked out of the meeting. KCTU criticized the public interest members' upper bound as effectively being a lower bound, especially given soaring inflation and declining real wages over the past three years. They asserted that this process was merely a formality to enforce low wages.

With KCTU's walkout, only five labor representatives from the Federation of Korean Trade Unions (FKTU) remained. However, FKTU narrowed the gap with the management side by proposing 9th and 10th revised proposals. Ultimately, the remaining 23 labor, management, and public interest members succeeded in reaching an agreement without a vote. This is positively evaluated as the minimum wage decision was achieved through social consensus. Previously, decisions were often made through voting, which frequently symbolized sharp conflicts and confrontations between labor and management.

Lowest Ever Increase Rate Record for First Year of Administration and Background 

This 2.9% increase rate is even lower than the 5.0% minimum wage increase during the first year of the Yoon Suk Yeol administration, marking the lowest figure among first-year minimum wage increases of any administration since 2000. Past administrations, such as the Moon Jae-in government (16.4%), Park Geun-hye government (7.2%), Lee Myung-bak government (6.1%), and Roh Moo-hyun government (10.3%), showed comparatively higher increase rates in their first years. Looking at the entire history since the minimum wage system began in 1988, this is the lowest level, excluding the first increase rate during the Kim Dae-jung government, which coincided with the IMF Asian financial crisis.

This low increase rate is analyzed to be a result of complex economic factors. It is interpreted as a reflection of the overall economic situation, including persistent high inflation, concerns about economic stagnation, and increasing difficulties for businesses. Furthermore, the fact that the public interest members who set the minimum wage range were appointed by the current Yoon Suk Yeol government may have also influenced this outcome. Public interest members play a role in coordinating the positions of labor and management and proposing reasonable standards, and there is a perspective that their judgment is not unrelated to the government's economic policy direction.

Positions of Each Party and Future Tasks 

Labor Sector (KCTU, FKTU): KCTU declared its non-participation in the agreement, strongly criticizing the decision as ignoring workers' livelihoods. FKTU also expressed regret, stating that the decided minimum wage level is "far short of what is needed for low-wage workers' living expenses." Both major labor unions emphasized the decline in real wages due to inflation and pressured the Lee Jae-myung government (the article uses the term "Lee Jae-myung government," so it is used here) to resolve the remaining issues. This indicates that the labor sector is expressing dissatisfaction with the minimum wage decision and demanding an active role from the government in future labor policies.

Management Sector (Korea Employers Federation): The Korea Employers Federation stated its hope that this agreement would be a "starting point for moving beyond conflict towards integration and harmony." At the same time, it requested the government to provide "meticulous policy complements and support" to prevent the minimum wage increase from leading to side effects such as deepening management difficulties or job cuts. This reflects the management sector's welcome of the agreement while strongly urging the government to prepare additional support measures to alleviate the burden on businesses.

Government: The Minister of Employment and Labor must officially announce next year's minimum wage by August 5th. Both labor and management can file objections before the announcement, but past precedents show no cases where objections were accepted and re-deliberation occurred. The government is expected to promptly pursue policies for economic recovery and民생 안정 (people's livelihoods) building on this minimum wage decision. In a situation of continued low growth and high inflation, minimizing the economic ripple effect of the minimum wage increase and promoting stability for vulnerable groups will be key tasks for the government. Particularly, with this minimum wage increase rate being the lowest ever, the government needs a delicate policy approach to simultaneously achieve the dual goals of stabilizing the labor market and invigorating businesses.

This minimum wage decision is more than just an increase in wages; it is an important indicator reflecting the complex issues currently facing the Korean economy. Attention is focused on how labor, businesses, and the government will navigate the dual challenges of economic stagnation and high inflation.