President Moon Jae-In has pledged in his election campaign to raise the minimum wage for workers to 10,000 won an hour by the year 2020. Pressured by the skyrocketing youth unemployment rates in the country, he initiated the policy to guarantee higher living standards for low income earners and boost domestic consumption to fuel the economy. In a pursuit to fulfill the promise, the Moon administration has already increased the minimum wage by 16.9% this year and intends to increase it even more to 8,350 won by 2019. Though the economic policy may have started with good intentions, the underlying negative implications of it has infuriated many small business owners driven to the brink of bankruptcy.
Self employed or small business owners complain that the policy forces many of their businesses to either shut down from financial pressure or cut its staff. The National Convenience Store Owners’ Association reported that the average monthly income for them has significantly dropped from 1.9 million won to 1.3 million won and was significantly harder for them to operate their businesses.
Not only that, many people criticized the economic policy as one that further deteriorated the economic conditions of low-wage employees. The Finance Ministry has released statistics indicating the drastic decline of jobs in retail and service industries within only six months of policy implementation: 225,000 jobs in the wholesale industries have been lost and jobs in accommodation and restaurants similarly fell by 96,000. Economists fear that South Korea is not ready for the dramatic raise in wages; the increase in wages has not only amplified the financial burden on start up businesses and small enterprises, it forced them to fire many of their employees who now struggle to find a job. The Korea Times reported that the rapid spike in wages currently threatens 140,000 jobs, without an adequate number of newly created jobs to counterbalance the troubling effect on employment opportunities.
Though the Korean government invested 3 trillion won for job stabilization and financial relief of employers, the Realmeter poll reported that Moon’s approval rating fell by 6 percentage, the biggest drop since the beginning of his presidency last year. Especially because the Korean economy is not ready to handle the blows of minimum wage, President Moon admitted that achieving his goal was infeasible by 2020 and apologized to his voters correspondingly. The Korean government, however, promises to fulfill the promise as quickly as possible and meanwhile subsidize local companies for job creation.