If You Don't Raise the Minimum Wage, Then a Bigger Calamity Will Follow... Let’s Not Become Like Japan
Date: January 13, 2018
Summary In light of the recent efforts by the Moon administration to raise the minimum wage and the arguments by his detractors, this article investigates Japan's lost 20 years to argue for increasing Korea's minimum wage. The gist of the argument is that given the large portion of jobs that pay the minimum wage, increasing it would have a large economic and social impact:
Higher minimum wage would give more money for people to consume, thus circulating more money in the domestic economy. Thus, while small businesses may suffer at first from the higher payroll, but a rebound in demand from greater consumption will ultimately compensate through an income-led growth.* Furthermore, as Korea's baby boom generation reaches senior age, the contraction in the workforce will flip leverage from the employer to the employee. The minimum wage will have to increase to re-calibrate this balance of forces.
A higher minimum wage would also lift up the hopes and livelihoods of a large section of young people and potentially diffuse Korea's ticking social time bomb: a generation of people too poor to marry or have children. Like Japan's satori generation that faced with a precarious future works mostly part-time jobs, spends little, and refrains from marriage and having children (40% of those under 34 are single), Korea also has a growing generation of young people faced with a harsh economic landscape that are Not into Education, Employment or Training (preparing to work): the NEET generation.
*Increase in the income of minimum-wage earners will more readily translate to higher consumption, as minimum-wage earners' increased disposable income would allow them to purchase goods they had foregone because they were too poor.