South Korea’s President, Moon Jae-in, wants its citizens to work less and earn more. To achieve this, the government has increased the minimum wage and cut down the maximum length of the working week.
Heo Jeong, who serves barley tea samples at a Lotte Mart store, reported to Reuters that she lost a third of her income as a result of Moon’s new wage implementation. Heo’s store cut staff hours and shortened opening times. She now works 32 hours instead of 40 and makes KRW 1.2 Million (USD 1,077), a third less than before.
But Heo isn’t the only one. Many businesses are closing early rather than hiring more staff after the legal cap on working hours was cut from 68 to 52 per week. The monthly average number of jobs added so far this year, 142,000, is at the slowest pace since 2008-2009 global financial crisis.
This shows that Moon’s reforms are starting to backfire and his pledge to tackle inequality may be at risk. Another issue is that a January hike in the minimum hourly wage, the biggest in 17 years at 16%, maybe have opposite effects on income for the lower paid.
The government-mandated Minimum Wage Commission increased concerns over the issue by announcing that the minimum wage will increase another 10.9% to KRW 8,350 (USD 7.40) an hour, next year.
On Monday, President Moon acknowledged the probable negative consequences for small business owners and low-income earners but advised his policies will continue to focus on boosting incomes.
Moon remains popular, with 69% backing in polling in July, even though it is down from a peak of 83% during May.
Labor unions believe the policies can only achieve this goal if small companies get subsidies and low-income earners get tax credits.