The proportion of workers estimated to be affected by the minimum wage has significantly decreased over the long term, but experts caution that this should not be interpreted as an improvement in the wage conditions for low-wage workers. The increase in the minimum wage has not kept pace with the overall nominal wage growth, leading to a lower relative benchmark for the minimum wage itself.
According to the Minimum Wage Commission on September 14, the impact rate of the minimum wage dropped from 25.0% in 2019 to 13.1% in 2026, halving over seven years. The number of affected workers also fell by more than 2 million, from 5.05 million to 2.904 million during the same period.
The Korea Labor Institute's report on the 'Trends and Decline of Potential Minimum Wage Impact Rates' also indicates a long-term decline in the potential impact rate of the minimum wage. This rate refers to the proportion of workers whose current hourly wage is below the next year's average nominal wage increase, even if it is assumed to rise. Although the methods and timing of calculation differ from the Minimum Wage Commission's impact rate, both indicators are used to gauge the potential effects of minimum wage increases on wage distribution.
The issue is that the recent decline in the potential impact rate is more influenced by the lower relative position of the minimum wage rather than an improvement in wages for low-income workers. An analysis by the Labor Institute categorized changes in the potential impact rate into 'benchmark effect' and 'other effects' related to wage distribution. From 2022 to 2025, the average annual increase in the minimum wage was recorded at 3.57%, which is 0.90 percentage points lower than the nominal wage growth rate of 4.47%.
The benchmark effect, which lowers the relative standard of the minimum wage, significantly reduced the potential impact rate by 1.48 percentage points. In contrast, other effects, such as changes in wage distribution, increased the potential impact rate by 1.04 percentage points. The combined potential impact rate decreased by 0.44 percentage points during this period.
Moreover, the relative wage conditions for low-income workers did not improve. From 2022 to 2025, the wage growth rate for the lowest 10% of workers averaged 5.69%, falling short of the median wage growth rate of 7.11%. Although both the minimum wage benchmark and the lower end of the wage distribution moved downward during this period, the shift in the minimum wage benchmark was more pronounced, according to the Labor Institute's analysis.
This contrasts sharply with the significant increases in the minimum wage from 2017 to 2019, when the average annual increase was 11.52%, far exceeding the nominal wage growth rate of 5.29%. During that time, the wage growth rate for the lowest 10% was 12.15%, surpassing the median wage growth rate of 7.31%.
Thus, the decline in the potential impact rate should not be hastily concluded as a reduction in low-wage workers or an improvement in wage conditions. The potential impact rate is defined in relation to the minimum wage, meaning it does not capture changes in low-wage workers who earn above the minimum wage but still fall short of two-thirds of the median wage.
In fact, the proportion of low-wage workers earning less than two-thirds of the median wage has shown a decreasing trend but has recently stagnated or slightly increased, indicating a different trend from the potential impact rate. The Labor Institute recommends that future analyses should segment the size and characteristics of groups related to potential impact by industry, business size, employment type, and working hours.
* This article has been translated by AI.
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