🚨 Minimum Wage: Worker Life Protection and Core Economic Policy

Today Korean Social News | 2025.06.30

📌 2026 Minimum Wage Talks Go Past Legal Deadline Due to Labor-Management Gap

💬 The Minimum Wage Committee continues discussions to decide the 2026 minimum wage. Labor groups want 11,460 won per hour, while business groups suggest 10,070 won per hour. The gap between them is 1,390 won. The talks went past the legal deadline of June 30th, with more discussions planned for July 1st at the 8th full meeting. Labor groups want a 14.3% increase due to rising prices and living costs, while business groups suggest only a 0.4% increase due to economic problems and labor cost worries. This yearly conflict shows how hard it is to decide minimum wage.

Summary

• Minimum wage is the lowest wage level set by law that all workers must receive per hour.
• Every year, the Minimum Wage Committee with labor, business, and public representatives decides next year's minimum wage.
• Finding balance between worker life protection and business cost burden is the key challenge.

1️⃣ Definition

Minimum wage means the lowest wage level set by law that all employers must pay workers per hour. Simply put, it's the minimum pay standard that workers must receive, whether they're part-time or full-time.

This amount is decided each year considering workers' living costs, similar workers' wages, labor productivity, and income distribution improvement. All employers have a legal duty to pay at least this amount.

💡 Why is it important?

• It guarantees basic living standards for low-wage workers.
• It sets minimum standards for payment for work.
• It helps reduce income inequality and contributes to social stability.
• It encourages companies to improve productivity.

2️⃣ Minimum Wage Decision Process and Committee Structure

📕 Role and Structure of Minimum Wage Committee

• The Minimum Wage Committee is the key organization that decides minimum wage. Its main structure includes:

  • 9 worker representatives who represent employees.
  • 9 employer representatives who represent business owners.
  • 9 public interest representatives who take neutral positions.
  • Total of 27 members appointed by the Minister of Employment and Labor.
  • The chairperson is chosen by election among public interest representatives.

• The minimum wage decision process follows systematic steps. The main procedures are:

  • Discussions start in March each year and must be finished by June 30th.
  • Labor and business groups each submit their increase proposals.
  • Multiple full meetings and subcommittee discussions take place.
  • If no agreement is reached, decisions are made by voting.
  • The decided minimum wage applies from January 1st of the following year.

📕 Factors for Minimum Wage Increases and Considerations

• Various economic factors are considered. Main considerations include:

  • Workers' living costs: calculating costs for minimum decent living.
  • Similar workers' wages: referring to wage levels in similar industries and jobs.
  • Labor productivity: reflecting the level of productivity improvement per worker.
  • Income distribution improvement: considering inequality reduction through low-wage worker income improvement.
  • Economic growth rate and inflation rate: comprehensive judgment of overall economic conditions.

• Labor-management position gaps repeat every year. Main issues include:

  • Labor groups demand increases above inflation rates.
  • Business groups worry about company cost burdens and job losses.
  • Small business owners and self-employed people complain about increased labor costs.
  • Economic experts also have different opinions on appropriate increase rates.
  • The government tries to find balance between worker protection and economic stability.

Main Issues in Minimum Wage Decisions

1. Living costs vs. business burden: Balance between workers' basic life guarantee and companies' cost burden
2. Job impact: Positive and negative effects of minimum wage increases on employment
3. Regional differences: Debate on national single standard vs. regional different applications
4. Application scope: Issues about exception targets like trainee workers and disabled people
5. Political considerations: Impact of political situations like elections on decisions

3️⃣ Effects and Impact of Minimum Wage

✅ Positive Effects and Social Significance

• It provides various benefits to workers. Main effects include:

  • It guarantees basic living standards for low-wage workers.
  • It increases work motivation and secures labor dignity.
  • It helps reduce income inequality and contributes to social integration.
  • It helps activate the economy through increased domestic consumption.
  • It has the effect of reducing social security costs.

• It also has positive impacts on companies and the overall economy. Main improvements include:

  • It encourages companies to improve productivity.
  • It reduces worker turnover rates, saving education and training costs.
  • It creates fair competition environments.
  • It has the effect of converting low-quality jobs to high-quality jobs.
  • It contributes to legitimizing the underground economy.

✅ Side Effects and Concerns

• Some negative effects may also appear. Main concerns include:

  • Employment reduction in small businesses may occur.
  • It may lead to reduced working hours or fewer benefits.
  • It may speed up automation or mechanization.
  • It may act as pressure for price increases.
  • It may worsen the business difficulties of small self-employed people.

• Effects appear differently by industry. Main characteristics include:

  • The impact is large in service industries like restaurants and hotels.
  • The burden is higher in labor-intensive industries rather than manufacturing.
  • Small and medium companies and small business owners are more affected than large companies.
  • Regional areas may have relatively larger burdens than metropolitan areas.
  • It directly affects non-regular workers and part-time workers more than regular workers.

4️⃣ Related Term Explanations

🔎 Living Wage

• Living wage is an appropriate wage level that allows workers to live decent lives.
• Living wage means wages that allow workers to maintain basic living while also participating in cultural and social activities. While minimum wage is the standard for minimum survival, living wage is a higher standard for decent human life.
• Main characteristics of living wage include: First, it's set at a higher level than minimum wage. Second, it can be applied differently reflecting regional prices and living costs. Third, it's often voluntarily introduced by public organizations or local governments. Fourth, while it has no legal enforcement, it's implemented as social responsibility.
• Several local governments including Seoul have introduced living wage systems, applying them to public organization employees or private contract workers. This is evaluated as a policy effort to guarantee living standards that minimum wage alone cannot provide.

🔎 Minimum Wage Committee

• The Minimum Wage Committee is a legal organization that deliberates and decides minimum wage.
• The Minimum Wage Committee is an organization established under the Minimum Wage Act that deliberates and decides minimum wage levels each year. It's established under the Minister of Employment and Labor and operates with a tripartite structure where labor representatives, employer representatives, and public interest representatives participate together.
• Main functions of the Minimum Wage Committee include: First, deliberating and deciding minimum wage proposals. Second, deciding when minimum wage takes effect. Third, deliberating targets excluded from minimum wage application. Fourth, determining the scope of wages not included in minimum wage. Fifth, discussing other matters related to minimum wage system operation.
• The committee consists of 9 worker representatives, 9 employer representatives, and 9 public interest representatives, with the chairperson selected from public interest representatives. Decisions are made by majority attendance of existing members and majority approval of attending members, and when agreement is difficult, decisions are made by voting.

🔎 Labor Standards Act

• The Labor Standards Act is a law that sets minimum standards for working conditions.
• The Labor Standards Act is a law enacted to guarantee workers' basic working conditions, setting minimum standards for labor relations including wages, working hours, breaks, and holidays. As a mandatory law applying to all workplaces, working conditions less favorable than those set by law are invalid.
• Main contents of the Labor Standards Act include: First, principles of monetary payment and direct payment of wages. Second, legal working hours of 8 hours per day and 40 hours per week. Third, guaranteeing annual paid leave and various holidays. Fourth, specifying just causes and procedures for dismissal. Fifth, making employment contract creation and delivery mandatory.
• The minimum wage system operates under the separate Minimum Wage Act from the Labor Standards Act, but the two laws have a complementary relationship. While the Labor Standards Act presents overall standards for working conditions, the Minimum Wage Act specifically guarantees the minimum level of wages.

5️⃣ Frequently Asked Questions (FAQ)

Q: What punishment exists for employers who don't follow minimum wage?

A: Employers who violate the Minimum Wage Act face strong punishment. Those who pay less than minimum wage face up to 3 years imprisonment or fines up to 30 million won. Also, workers can claim the difference from minimum wage as compensation, and they can receive additional compensation of the same amount (predetermined compensation amount). For example, if someone received 500,000 won less than minimum wage per month, they can receive a total of 1 million won including the 500,000 won difference plus 500,000 won in predetermined compensation. When labor inspectors confirm violations through regular inspections or reports, they issue correction orders, and if not complied with, they report to judicial authorities. Minimum wage violation reports can be made to the Ministry of Employment and Labor Customer Service Center (1350 without area code) or local employment and labor offices, and reporter identity is protected. Workers can claim damages from minimum wage violations going back 3 years, so it's important to definitely report if wages weren't properly received.

Q: If minimum wage keeps rising, won't prices rise too?

A: The impact of minimum wage increases on prices is complex. There is some impact, but it's not a major cause of overall price increases. Looking at how minimum wage increases affect prices, companies with increased labor costs may raise prices to pass on costs. This phenomenon may especially appear in service industries like restaurants, cafes, and beauty services. However, not all companies can raise prices, and price increases are limited in highly competitive industries. Also, when minimum wage increases raise low-income people's income, increased consumption can bring positive effects to the overall economy. Actual research shows that a 10% minimum wage increase only raises prices by about 0.1-0.3%. Prices are affected by various factors like oil prices, exchange rates, international grain prices, and real estate prices, so minimum wage alone doesn't cause large price increases. Rather, appropriate minimum wage increases can contribute to economic growth through domestic market activation.