Amid ongoing tensions between labor and management over minimum wage increases, a new study indicates that raising the minimum wage next year could result in job losses.
According to a report from the Fighterch Institute released on June 23, a 16.3% increase in the minimum wage for 2027 could lead to a 1.9% decrease in jobs, equating to approximately 443,000 positions lost compared to this year.
The report also forecasts a 0.3% decline in real GDP (about 8.1 trillion won) and a 0.3% drop in total innovation investment (around 400 billion won).
The Fighterch Institute attributes the job losses primarily to reduced labor demand and production among small businesses, which are particularly sensitive to minimum wage changes.
"The burden of labor costs reduces innovation investments, such as the development of new products," said Fighterch Institute Director Ra Jeong-joo. "When small businesses reduce production, the prices of their products increase, leading to decreased production in larger companies that source from them."
If the minimum wage is raised by 5%, the report predicts annual declines of 2.6 trillion won in real GDP, 151,000 jobs, and 100 billion won in total innovation investment. A 10% increase would result in annual reductions of 5.1 trillion won in real GDP, 288,000 jobs, and 200 billion won in total innovation investment.
Meanwhile, the Minimum Wage Commission convened its 8th plenary meeting at the Government Sejong Center on the same day to begin discussions on the minimum wage increase for next year.
Labor representatives have proposed a minimum wage of 12,000 won per hour, a 16.3% increase from this year's rate of 10,320 won, which would amount to 2.508 million won per month based on 209 hours of work. In contrast, management representatives have suggested freezing the wage for the fifth consecutive year.
Ra emphasized, "Our country's minimum wage is already at 60.5% of the median wage for full-time employees as of 2024, which is a high level. Excessive demands for increases can negatively impact the economy."
* This article has been translated by AI.
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