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| Strategy and Finance Minister Kim Dong-yeon, left, and Bank of Korea Governor Lee Ju-yeol speak to reporters after a meeting, Monday. The top economic and monetary policymakers agreed to coordinate efforts to tackle risks such as a global trade war and worsening job market conditions. / Yonhap |
By Yoon Ja-young
President Moon Jae-in apologized Monday for failing to achieve the 10,000 won minimum wage by 2020 as he had pledged during the presidential election. The country's top economic policymaker, meanwhile, said that the minimum wage hike could weigh on economic policies in the latter half of the year.
The Minimum Wage Council set the hourly minimum wage for next year at 8,350 won ($7.4), Saturday, up 10.9 percent from this year and marking double digit growth for the second consecutive year following a 16.4 percent hike last year.
"The Minimum Wage Council made the decision taking into account the job market condition and difficulties that small merchants are facing," President Moon said at the meeting with his top aides, Monday.
It has now become difficult to reach the President's target as the increase was below expectations. While apologizing for failing to meet the deadline, Moon said that it should reach 10,000 won as soon as possible. The administration has aimed at stimulating the economy by increasing the income of low wage earners.
"To maintain the pace of the hike, the economy should be able to withstand the raises. The government will prepare complementary measures to lessen the damage small businesses and merchants suffer," he said.
However, the steep hike has been concerning economists who cited it as one of the reasons behind worsening unemployment figures as employers are prompted to let employees go. The country's top policymaker shared these concerns.
"The negative impact of the minimum wage hike on jobs is becoming a reality in some age groups and industries. It can affect jobs when considering the capacity of employers," Strategy and Finance Minister Kim Dong-yeon said after a meeting with Bank of Korea Governor Lee Ju-yeol.
While admitting that the minimum wage hike was necessary when considering workers with low pay as well as the problems of income distribution and polarization, he noted that the steep hikes could negatively affect economic sentiment as well.
The council also suggested expanding the government's 3 trillion won subsidy fund for employers, a plan Kim was not in favor of.
"The government helped with a job stabilization fund this year of nearly 3 trillion won, and I think it was partially effective as a complementary measure. Last year, it was necessary to lessen the burden on employers and the shock to the market as the minimum wage was raised steeply, but it is better to minimize intervention in the market through the government budget," he said.
The meeting between the finance minister and the central bank governor was held at the suggestion of Kim following a meeting in April when the two attended the G20 meeting of finance ministers and central bank governors in Washington D.C.
They agreed to coordinate fiscal and monetary policies based on close cooperation, while noting that the economy is in a tough situation considering the trade conflict between the United States and China and the sluggish job market.
"Though the economy is continuing to grow solidly, there are a few risk factors that can destabilize the financial market," Lee said.
"The global trade conflict could considerably affect our exports, investment and employment, and financial instability in emerging markets may expand," he added.
Last week, the Bank of Korea lowered its economic growth outlook for this year to 2.9 percent from its previous estimate of 3 percent. When asked whether the government will also lower its growth outlook to below 3 percent, Kim said, "We are examining risk factors though the economy is still on track with its growth potential."
Regarding the weakening Korean won against the dollar, Lee said the U.S. dollar has been strengthening globally. The won/dollar rate surpassed 1,130 won last Thursday for the first time since last October.
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