Posts titled "minimum wage frozen for 7 years" have been spreading across online communities recently. They say that when Korea's minimum wage is converted into dollars, it has stayed around $7 from 2018 through this year. It is a phrase that satirizes the decline in the won's value, but it is not far off the mark.
According to the Minimum Wage Commission on the 17th, this year's minimum wage is 10,030 won per hour. Compared with 2018 (7,530 won), that is a 33.2% (2,500 won) increase. But over the same period, the won-dollar exchange rate, measured as the annual average, jumped 28.9% from 1,100.16 won to 1,418.35 won this year. Intraday in the Seoul foreign exchange market that day, it even broke above the 1,480-won level.
Because of the weaker won, the minimum wage in dollar terms has actually backtracked. The dollar-converted minimum wage rose to the $7 level for the first time from $6.84 in 2018 to $7.17 in 2019 during the Moon Jae-in administration, and climbed to $7.62 in 2021.
It then turned lower, falling to $7.23 last year and $7.07 this year. With the 2026 minimum wage set at 10,320 won per hour, if the won-dollar exchange rate rises further from its current level in the 1,470-won range, even holding the $7 level cannot be guaranteed.
It has also become tighter to save up for overseas travel with a part-time job. According to the National Travel Survey, the average overseas travel expense per person among people in their 20s was 1.17 million won in 2019, but increased to 1.47 million won this year (January–October). By the minimum hourly wage, a simple calculation shows that it took 140 hours of work in 2019, but 143 hours are needed now.
The strong dollar is pushing up import prices. Street vendors selling winter snacks like bungeoppang and hotteok say their costs are rising.
A vendor in her 60s surnamed Kim, who runs a bungeoppang stall in Mapo District, Seoul, said, "There isn't a single input like batter or red beans that hasn't gone up," and added, "Customers say '2,000 won for three' is expensive, so I can't even raise prices."
The import price of flour rose 10% from $0.97 per kilogram in 2023 to $1.07 this year. Reflecting the won-dollar exchange rate on top of that, the increase in won terms reaches 19.8%. Sugar's import price also climbed 2.2% over the same period from $0.91 to $0.93 per kilogram, but when the exchange rate is factored in, the rise in won terms jumped to more than 11%.
Truck drivers are sighing over fuel costs. The average international price of diesel fell 17.2% from $106.42 per barrel in 2023 to $88.09 this year. But domestic gas station diesel prices fell only 0.5% over the same period, from an average of 1,558.26 won per liter in 2023 to 1,549.17 won this year. That reflects the higher won-dollar exchange rate and the reduction in the fuel tax discount rate from 37% in the first half of 2023 to 10% now.
In particular, because of the surging exchange rate, the national average diesel price has exceeded 1,600 won per liter since November. As of that day, the national average was 1,651.31 won and the Seoul average was 1,714.21 won. Online forums for individual truck drivers are filled with complaints such as "Fuel prices are terrifying" and "Every penny I earn goes back into the truck."
Experts say the won-dollar exchange rate is unlikely to fall quickly. Lee Sang-heon, an analyst at iM Securities, said, "The United States also pumped money, but its near-3% economic growth offset that, whereas Korea pumped money and is still stuck at 1%-range growth," adding, "In the end, it's a fundamentals issue."
The business sentiment and outlook among small merchants, which briefly rebounded on the Lee Jae-myung administration's "consumption coupons," has also turned down. The perceived business survey index (BSI) compiled by the Small Enterprise and Market Service was 75 in November, down 4.1 points from 79.1 in October. The business outlook BSI also fell 7.5 points, from 90.7 in November to 83.2 in December. A BSI below the baseline of 100 indicates a deterioration in business conditions.