Korea's minimum wage is 20% higher than the G7 average, but productivity is 30% lower

[Financial News] Korea's minimum wage level is nearly 20% higher on average than that of the Group of Seven (G7) advanced economies, but labor productivity is less than 70% of the G7 average.
The Korea Enterprises Federation (KEF) said on the 21st in a report titled "Analysis of Factors for Adjusting the Minimum Wage to Be Applied in 2027 Based on Major Statistics" that Korea's annualized minimum wage is 6.4% higher than the G7 average on a purchasing power parity exchange rate (PPP) basis.
In particular, when calculated on a post-tax basis, Korea's minimum wage was found to be 17.9% higher than the G7 average because the tax rate for minimum-wage earners is low.
KEF explained that over the past 10 years, the minimum wage has risen far more sharply than nominal wages or inflation. As a result, Korea's minimum wage is considered very high by international standards despite its low labor productivity.
The minimum wage level relative to Korea's median wage was also 62.2%, exceeding the upper bound of the appropriate range, which is 60%. Among major advanced economies, only the United Kingdom and France are at a similar level, while the G7 average stands at 49.3%, significantly lower than Korea's.
A comparison of the minimum wage with wage and price increases showed that over the past 10 years, nominal wages rose only 39.6% and the consumer price index increased 22.9%, while the minimum wage climbed 79.7%. The statutory minimum wage increase for workers who work at least 15 hours a week reached 115.9%.
Based on a comparison of hourly labor productivity in Korea and the G7, Korea's minimum wage level was much higher than the G7 average both in annualized terms and relative to median wages. However, Korea's hourly labor productivity was $55.2, only 68.8% of the G7 average of $80.2.
Ha Sang-woo, a user representative on the Minimum Wage Commission, said, "Korea's minimum wage level, including the minimum wage relative to median wages and the annualized minimum wage, has reached a very high international level, while labor productivity has been shown to fall short of the average." He added, "As the minimum wage for 2027 will be decided using a single standard, the legally mandatory minimum wage should be set based on businesses that are already struggling to afford the current minimum wage, such as lodging and food service establishments and workplaces with fewer than five employees."
hjkim01@fnnews.com Kim Hak-jae Reporter