U.S. and Japan Raise Hourly Wages, Why Isn’t South Korea Following?

California has raised the minimum wage for fast-food workers to $20 an hour. According to the Associated Press, the new wage rate was implemented on the 1st, marking a 29% increase from last year’s minimum wage of $15.50.

California Governor Gavin Newsom signed an expedited bill in September last year to raise the minimum wage for fast-food chain workers nationwide to $20. With over 60 branches nationwide, it is estimated that over half a million people will benefit from this wage increase. Most of these workers are not teenagers working part-time but adults supporting families, which is likely the reason behind the wage increase. The wage increase in California includes fast food like hamburgers and pizza and businesses selling coffee, donuts, ice cream, and other beverages and candies.

Local media outlet Fox Business reported that before this law was enacted, major franchise industries such as Pizza Hut and Southern California Pizza took measures such as mass layoffs of employees. Experts predict that with increased wages, product prices will likely rise, increasing consumer burden.

The California state government implemented a minimum wage of $16 in January of this year. In the US, a law allowed employers to pay only $2.13 per hour, one-third of the federal minimum wage, for jobs that receive tips, such as food servers. However, since 2018, wealthy state governments have abolished this and raised the minimum wage to $20. California has abolished the differential minimum wage.

Japan, a country close to South Korea, has also made significant amendments to laws related to the minimum wage. From the 1st, Japan revised the law to enforce the upper limit of overtime for doctors, construction workers, truck drivers, etc., who were exceptions to the overtime cap regulation. This is a correction of the regulation on overtime work by expanding the Black Company Prevention Act, which was implemented in 2016, to all occupations.

“Black Company” refers to companies that force long work hours or where workplace harassment is rampant. The advertising company Dentsu is considered a representative black company. In 2015, a new employee committed suicide while working long hours, and the issue of long working hours has become an unavoidable social problem in Japan.

At that time, Japan implemented an 8-hour day and 40-hour week system, but long work hours were possible due to labor-management agreements that could exceed this limit. It was confirmed that the new employee at Dentsu had a problem working continuously for 53 hours.

Accordingly, starting in 2019, Japan has established a law that stipulates overtime for large companies at 45 hours per month and 360 hours per year, with punishment for violations. The doctors and truck drivers included in the Black Company Prevention Act maintained a grace period of 5 years, but it was reduced by half from 1,860 hours per year, and only 960 hours of overtime per year were allowed from the 1st.

While the countries close to South Korea, such as Japan and the United States, are improving their working environment through the minimum wage system and the Black Company Prevention Act, controversy over the Korean working system continues. There was a backlash against the claim to lower the average minimum wage when the Central Bank of Korea proposed differentiating the minimum wage by industry last month.

It’s unsurprising, as attempts to raise the minimum wage are seen worldwide, but attempts to lower it are rarely seen. Exceptionally, Greece cut the minimum wage by 20% after the financial crisis in 2012. But this was a truly exceptional case. There are no cases where the minimum wage has been reduced in any part of the world.

While the United States and Japan continue to raise the minimum wage and improve the working environment of workers, questions are raised as to why Korea is insisting on a different path.

If we analyze the reason in detail, we can guess that it is because the economic situations in the United States, Japan, and Korea are different. In the United States, wage growth is expected to continue, and Japan must escape deflation. In the case of Korea, as industrial competitiveness is declining and exports and domestic demand are struggling, it has even been argued that a differentiated minimum wage payment system should be implemented.

Unlike Korea, the United States and Japan implemented a middle-class income-led policy last year, confirming that wage increases and price decreases occurred simultaneously. The Biden administration in the United States has identified the infrastructure law as the core of the middle-class income-led policy, and the Kishida cabinet in Japan has also promoted the expansion of the middle class through measures such as inducing wage increases and strengthening distribution to subcontracting companies.

On the other hand, in Korea, there is a tendency to concentrate benefits on high-income groups and large companies. The fact that the government cuts or exempts taxes for high-income earners with an annual income of $69,300 or more, amounting to $13.7 billion, proves this.

Meanwhile, the minimum hourly wage in Korea is roughly $8.80, which is nearly half the level compared to the UK’s $14.41, Australia’s $15.10, Germany’s $13.40, France’s $12.58, and Canada’s $12.80.