Public interest members tweak minimum wage deliberation formula again, dropping government growth forecast

The public interest members of the Minimum Wage Commission excluded the government's economic growth forecast when setting this year's deliberation-facilitation range, relying instead solely on projections from the Bank of Korea and the Korea Development Institute (KDI).

The formula has also changed from last year, when the members used a "national economic productivity growth rate" calculation, renewing criticism that the criteria for determining the deliberation-facilitation range shift from year to year.

According to the commission's published basis for the range, released Tuesday, the public interest members proposed a deliberation-facilitation range for next year's minimum wage of 10,600 won ($7) per hour, or a 2.7 percent increase, to 10,860 won, or a 5.25 percent increase.

The lower bound directly applied the 2026 consumer price inflation forecast of 2.7 percent. The upper bound was calculated by adding that 2.7 percent inflation forecast to the average of the Bank of Korea's economic growth forecast of 2.6 percent and KDI's forecast of 2.5 percent, yielding a combined figure of 5.25 percent.

Notably, the government's own 2026 economic growth forecast of 3.0 percent — released the same day — was left out of the calculation. The public interest members averaged only the Bank of Korea and KDI projections but offered no separate explanation for why the government figure was excluded.

The formula itself also differs from last year's. In the previous round, the public interest members set the upper bound using what is known as the national economic productivity growth rate — calculated as the economic growth rate plus the consumer price inflation rate minus the employment growth rate. This year, they dropped the employment growth rate and simply added the economic growth rate and the consumer price inflation rate together.

The same economic indicators are being used, but the way they are applied keeps changing. In 2021 and 2022, the national economic productivity growth rate in effect served as the basis for the final wage decision. Last year, it was used to set the upper bound of the deliberation-facilitation range. This year, the upper bound was again derived through a new method that excludes the employment growth rate.

The Minimum Wage Act states in Article 4 that the minimum wage "shall be determined by taking into account workers' cost of living, wages of similar workers, labor productivity, and income distribution," but the law sets no separate rules governing how public interest members must calculate the deliberation-facilitation range.

As a result, critics in both labor circles and expert communities argue that the calculation criteria should be disclosed more clearly, given that the deliberation-facilitation range in effect determines the level of the minimum wage. Without objective standards for which economic indicators to use and whose forecasts to incorporate, they say, predictability and public acceptance of the outcome will suffer.

Meanwhile, the Lee Jae Myung administration has included "improvements to the operation of the Minimum Wage Commission and the criteria for setting the minimum wage" among its national policy tasks. The public interest members also recommended Tuesday, through a formal advisory note, that the Ministry of Employment and Labor establish a "minimum wage system reform task force." With that recommendation on the table, a broader discussion on overhauling the minimum wage decision-making framework — including the deliberation-facilitation range — is expected to begin in earnest.