An analysis found that Korea's minimum wage level far exceeds the Group of Seven (G7) average, while workers' productivity remains in the lower tier.
The Korea Enterprises Federation (KEF) said this was found in its report published on the 21st, "Analysis of factors for adjusting the minimum wage to be applied in 2027 based on key statistics."
According to KEF, Korea's annualized minimum wage amount, based on purchasing power parity (PPP), was 6.4% higher than the G7 average. In particular, as a lower tax rate is imposed on those subject to the minimum wage, the after-tax minimum wage level was found to be 17.9% higher than the G7 average.
Last year, Korea's after-tax annualized minimum wage (PPP basis) recorded $27,571. Among G7 countries, only the United Kingdom ($31,562) and France ($27,612) had higher minimum wages than Korea.
KEF explained, "Considering that the Organization for Economic Cooperation and Development (OECD) noted the effectiveness of minimum wage policy depends on workers' actual take-home pay, Korea's real minimum wage is exceptionally high by global standards."
Korea's minimum wage relative to the median wage was also was found to be 62.2%, exceeding the appropriate upper bound of 60%. In general, the appropriate level for operating a minimum wage without side effects is presented as 40–50% of the median wage.
The minimum wage relative to the average wage was 52.7%, far exceeding the 35% threshold that the International Monetary Fund (IMF) sees as causing negative shocks to employment.
Korea's minimum wage has jumped by a much larger margin than nominal wages or prices. Over the past 10 years, Korea's nominal wages and the consumer price index rose 39.6% and 22.9%, respectively, while the minimum wage climbed 79.7%. In particular, the statutory minimum wage increase rate for workers employed 15 hours or more per week reached 115.9%.
By contrast, workers' hourly labor productivity ($55.2) was only 68.8% of the G7 average of $80.2.
Ha Sang-woo, a KEF director, said, "While Korea's minimum wage level has reached a very high level internationally, labor productivity appears to fall short of the average," and emphasized, "As the minimum wage to be applied next year will be decided by a single criterion, the statutory mandatory wage, the minimum wage, should be set based on business sites such as accommodation and food service outlets and establishments with fewer than five employees, which find it difficult to afford even the current minimum wage."