Minimum Wage
Overview
The minimum wage (최저시급, minimum wage) is the lowest hourly wage level that the state mandates employers to pay by law. It is a key labor policy tool to guarantee workers' minimum standard of living, prevent labor exploitation, and alleviate income inequality. The minimum wage is generally adjusted annually or at regular intervals, taking into account factors such as inflation, economic growth, productivity, and unemployment rates. In South Korea, the minimum wage system was first introduced in 1988, and since then, it has been determined annually through deliberation by the Minimum Wage Commission. As of 2025, it is 10,030 won per hour.
Main Content
Purpose and Significance of the Minimum Wage
The most fundamental purpose of the minimum wage is to ensure a decent standard of living for workers. Based on Article 32 of the Constitution and the Minimum Wage Act, the state sets the minimum wage considering workers' living costs, wage levels, labor productivity, and income distribution. This is expected to protect the income of low-wage workers, reduce income gaps, and stimulate domestic consumption. Additionally, it prevents excessive wage competition among businesses and fosters a fair labor market.
Determination Process and Criteria
In South Korea, the minimum wage is deliberated and decided by the Minimum Wage Commission under the Ministry of Employment and Labor. The commission consists of 27 members: 9 representatives each from workers, employers, and public interest groups. Meetings are held from March to June each year to determine the minimum wage for the following year. The criteria for determination comprehensively consider workers' living costs, wages of similar workers, labor productivity, income distribution rates, inflation, economic growth rates, and employment conditions. The final amount is announced by August 5, and if there are objections, a request for reconsideration can be made within 10 days.
Scope of Application and Exceptions
The minimum wage applies to all workplaces, including any business or workplace that employs one or more workers. However, workers in a probationary period (within 3 months) may be paid up to 90% of the minimum wage. Exceptions are recognized for domestic workers, seafarers under the Seafarers Act, and workers with disabilities under the Act on Employment Promotion and Vocational Rehabilitation of Persons with Disabilities. The minimum wage is calculated based not only on the base salary but also on various allowances included in the ordinary wage (e.g., job allowances, skill allowances). Overtime, night, and holiday work premiums must be paid separately.
Economic Impact and Controversies
Raising the minimum wage brings both positive and negative effects. On the positive side, it improves the living standards of low-wage workers through income increases, boosts consumption, enhances labor productivity, and encourages voluntary corporate restructuring. On the negative side, it may lead to reduced employment (especially for youth and low-skilled workers) due to increased labor costs, worsen the management of small and medium-sized enterprises (SMEs) and small business owners, expand non-regular employment, raise prices, and accelerate automation and unmanned operations. These controversies spark social conflict every year during the minimum wage determination period. In particular, research has been actively conducted on the impact on the labor market following the sharp increase in 2018 (a 16.4% rise from 6,470 won to 7,530 won).
International Comparison
Comparing the minimum wage levels of OECD countries, South Korea's minimum wage is at a mid-range level. As of 2024, Australia (approx. 17,000 won), Luxembourg (approx. 16,000 won), and France (approx. 14,000 won) are on the higher side, while the U.S. federal level is about 9,000 won (varies by state), and Japan is about 8,500 won. International discussions on the appropriate level of the minimum wage continue, and the International Labour Organization (ILO) has recommended that the minimum wage should be around 60% of the median wage.
Recent Trends
Key trends related to the minimum wage as of 2024 and 2025 are as follows. First, South Korea set the 2025 minimum wage at 10,030 won, surpassing 10,000 won for the first time in history. This is a 1.7% increase from the previous year, but it has been criticized for failing to reflect the inflation rate (approx. 2.5%), resulting in a real wage decline. Second, discussions on differentiated application of the minimum wage by industry are gaining momentum. Proposals have been made to apply different minimum wages for specific industries such as accommodation and food services, and courier and delivery services, citing their business difficulties, but this has not yet been implemented due to opposition from labor unions. Third, the rate of workers earning below the minimum wage (the underpayment rate) stood at 12.5% as of 2023, still high, with particularly high rates among women, youth, foreign workers, and workers in small businesses. Fourth, the development of AI and automation technologies is replacing low-wage simple labor, raising concerns about the impact of minimum wage increases on employment. Fifth, internationally, discussions on raising the federal minimum wage continue in the United States, and the European Union (EU) has been implementing directives since 2024 to strengthen minimum wage adequacy standards for member states.
Related Topics
- [[Minimum Wage Act]]
- [[Wage]]
- [[Labor Market]]
- [[Income Inequality]]
- [[Workers' Rights]]