South Korea's real after-tax minimum wage is 17.9% higher than the average of major advanced economies, according to a recent analysis. The business sector argues that any increase in the minimum wage for next year should be approached with caution, considering the burden on small businesses.
On June 21, the Korea Employers Federation (KEF) released its "Analysis of Factors for Adjusting the Minimum Wage for 2027," which found that South Korea's after-tax minimum wage annualized amount was $27,571 based on purchasing power parity (PPP) exchange rates. This figure surpasses the G7 average of $23,390, placing South Korea third, following the UK ($31,562) and France ($27,612).
South Korea's pre-tax minimum wage annualized amount is $30,997, which is 6.4% higher than the G7 average of $29,135. The PPP method accounts for differences in price levels across countries to compare actual purchasing power.
The KEF explained that the relatively low tax rate on minimum wage earners in South Korea results in higher actual take-home pay compared to major advanced economies. Last year, the minimum wage accounted for 62.2% of the median wage among all workers in South Korea, exceeding the generally accepted threshold of 60%.
The analysis also indicated that over the past decade, the pace of minimum wage increases in South Korea has outstripped both wage and price inflation. The minimum wage rose by 79.7% from 2015 to last year, while nominal wage growth reflected only a 39.6% increase, and consumer prices rose by 22.9%. The increase in hourly labor productivity was recorded at 12.4%.
The burden of rising minimum wages is increasingly felt by small businesses. The percentage of wage workers earning below the minimum wage reached 12.4% last year, nearly three times higher than in 2001. In the accommodation and food services sector, this rate soared to 31.6%. Four out of ten small business owners reported that their average monthly operating profit fell short of the minimum wage monthly equivalent of 2,096,000 won.
The KEF emphasized that the minimum wage for next year should be determined with consideration for the payment capacity of sectors struggling to meet the current minimum wage levels.
Ha Sang-woo, a KEF director and employer representative on the Minimum Wage Commission, stated, "In our country, the minimum wage relative to the median wage and the annualized minimum wage have reached very high levels internationally, while labor productivity has not even met the average. The minimum wage for 2027 should be set based on a single standard, particularly for sectors like accommodation and food services and businesses with fewer than five employees that are already struggling to meet the current minimum wage."
* This article has been translated by AI.
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