SEOUL, Oct. 18 (Korea Bizwire) — The Moon Jae-in administration will have to spend over 7.3 trillion won (US$6.4 billion) in the 2018-2020 period to subsidize the raising of the country’s minimum wage to 10,000 won ($8.8) per hour, a report said Wednesday.
The Moon government said in July it will raise the minimum wage by 16.4 percent to 7,530 won per hour next year in the biggest wage hike in nearly two decades.
Moon hopes the wage hike will narrow the income gap and boost private consumption to help revive the sagging economy amid concerns the sharp wage hike will eventually prompt small businesses to shed employees.
The report by the National Assembly Budget Office estimated the government needs to spend 2.9 trillion won in 2018, 2.3 trillion won in 2019 and 2 trillion won in 2020 in government subsidies to employers of about 2.99 million workers being paid minimum wage to achieve the hourly minimum wage of 10,000 won by 2020.
The minimum wage is set to rise to 10,000 won in 2020 from 7,530 won in 2018 and 8,678 won in 2019 at an annual average increase rate of 15.42 percent, according to the report.
Rep. Shim Jae-chul of the major opposition Liberty Korea Party (LKP) called on the government to reconsider the plans for the drastic wage increase, saying, “We need to discuss ways to present the reasonable minimum wage suitable for the economic and employment market conditions.”
Finance Minister Kim Dong-yeon last month hinted at a possible review of the wage hike plans, saying, “The direction is clear that the minimum wage must be raised, but the government will carefully review the pace of the increase after next year.”