Minimum wage deliberations begin in earnest as labor seeks 16% hike, business balks

The Minimum Wage Commission has formally opened deliberations to set next year's minimum wage.

Labor representatives opened with an initial demand of 12,000 won per hour, citing the need to ease the cost-of-living burden on low-wage workers, while business groups argued that the current minimum wage is already difficult to absorb and urged restraint on any increase. Within the business camp, proposals ranging from a freeze to an outright cut have surfaced, and the employer side has yet to agree on a unified opening position.

The commission held its eighth plenary session Tuesday at the Government Sejong Complex, marking the first formal discussion on the wage level. The session was attended by all 27 commissioners — nine each representing workers, employers and the public interest.

Tensions between labor and management were on display from the outset. Worker representatives displayed placards reading "Raise it, raise it — minimum wage to 12,000 won," "Kospi 10,000 or minimum wage 12,000 won," "Everything went up except our paychecks — raise the minimum wage," and "Reflect household living costs and guarantee real wages."

Labor formally submitted its opening demand of 12,000 won per hour for next year's minimum wage — 1,680 won, or 16.3%, above this year's rate of 10,320 won. The monthly equivalent, based on a 40-hour workweek and 209 hours per month, would be 2,508,000 won. The employer side has yet to finalize its opening position, with sources saying internal coordination is still underway amid calls from some employer commissioners for a reduction.

Ryu Ki-jung, executive managing director of the Korea Employers Federation, said it was "deeply regrettable" that sector-differentiated minimum wage rates had once again been rejected. "Since a single minimum wage must now apply to all workplaces regardless of industry, next year's rate should be set with the most struggling sectors and smallest businesses as the benchmark," he said.

Ryu said the minimum wage had risen 79.7% over the past decade, far outpacing nominal wage growth of 39.6% and consumer price inflation of 22.9% over the same period. He added that the minimum wage now stands at 62.2% of the median wage, already exceeding the 60% threshold widely regarded internationally as the upper bound of an appropriate level.

He said the share of workers earning below the minimum wage reached 12.4% last year, with the figure surpassing 30% in the accommodation and food service sector and at workplaces with fewer than five employees. "For some industries and small businesses, even the current minimum wage is already difficult to comply with," he said.

Ryu also cited a survey conducted by the Korea Federation of Small Business Owners in May covering 700 small business owners nationwide, in which 87% said they felt a heavy burden paying the current minimum wage and 98.5% said next year's rate should be cut or frozen.

He also offered international comparisons, saying South Korea's annualized minimum wage in 2025 stood at $30,997 at the assessment exchange rate — 6.4% above the G7 average — while the after-tax minimum wage of $27,571 was 17.9% above the G7 average. "This deliberation must fully take into account the reality that the minimum wage level is already high and that the capacity of workplaces to absorb further increases has reached its limit," he said.

Yang Ok-seok, head of the human resources policy division at the Korea Federation of Small and Medium-sized Enterprises, warned that raising the minimum wage beyond labor productivity growth would eliminate jobs and accelerate the adoption of kiosks, unmanned systems and AI automation. "It will wipe out employment opportunities not only for temporary and daily workers but also for unskilled and vulnerable groups," he said.

Yang said labor cost pressures would make it harder for small and medium-sized enterprises to invest and conduct research and development, reduce full-time positions and drive a rise in ultra-short-term split employment. He added that reduced operating hours and service cutbacks among small business owners would also diminish consumer convenience.

"Rising minimum wages feed into higher labor costs, which get passed on to product and service prices, pushing up inflation and then creating renewed pressure for wage increases — a vicious cycle that could repeat itself," he said. "Everyone will remember the shock of the 30% minimum wage hike in 2017 and 2018."

Labor representatives pushed back, arguing that steep increases are unavoidable given high inflation and a cost-of-living crisis.

Ryu Ki-seop, secretary-general of the Federation of Korean Trade Unions, said the commission must honor the spirit of the Minimum Wage Act, which places workers' living costs as the foremost consideration. He acknowledged that the economic growth outlook has been revised upward on the back of strong semiconductor exports, but said the recovery remains uneven.

Ryu said excess profits at large corporations are flowing upward while social risks and costs are rapidly spilling down to the lower rungs of the labor market — what he called a "reverse trickle-down effect." "The current crisis is an era of cost-of-living hardship brought on by polarization in the labor market," he said.

He said the demand for a 12,000-won hourly minimum wage was aimed at stabilizing the livelihoods of low-wage and vulnerable workers struggling against falling real wages driven by high oil and consumer prices and energy cost pressures. "It is the most practical measure to protect local economies and the self-employed while reviving domestic demand through increased consumption," he said.

Lee Mi-seon, vice chairwoman of the Korean Confederation of Trade Unions, said the current hourly rate of 10,320 won — equivalent to a monthly wage of 2,156,880 won — barely passes through workers' bank accounts after deductions. "It is hard to cope with soaring grocery prices and utility bills on a take-home pay of just over 2 million won," she said.

Lee said workers are not demanding a higher minimum wage because it causes inflation, but because prices have risen so sharply that survival requires it. "Workers' wallets need to open for neighborhood businesses to survive, and for small merchants and the self-employed to get by," she said.

Seong Jae-min, a public interest commissioner, said Tuesday's session was the first discussion on the wage level and described the minimum wage as an important task requiring comprehensive consideration of workers' living costs, wages of comparable workers, labor productivity and income distribution — all factors stipulated under the Minimum Wage Act.

Seong said the South Korean economy continues to face significant uncertainty even amid semiconductor-led growth. "In such circumstances, it is more important than ever that all sides fully present their positions while grounding the discussion in objective data and facts," he said.