There Was No Massive Layoffs Due to the Higher Minimum Wage

Despite fears of massive layoffs due to the higher minimum wage, in reality, the situation was quite different.

Workplace Abuse 119 (Jikjang Gapjil 119), a non-government organization, analyzed 77 cases reported through e-mails in connection to the minimum wage from January 2 to 20 and concluded that there was only one layoff. The report claimed that a medical institution released a restructuring plan including reduced working hours and staff cuts. The result was contrary to the argument by some people who claimed that a sharp increase in the minimum wage would trigger a stream of layoffs.

Bak Jeom-gyu, a member of the NGO's steering committee said, "Companies have an amount of work that needs to be done, and laying people off just because of an increase in the minimum wage is not a possible option for employers who plan to continue their business. The result proves that the argument of massive layoffs was incorrect."

Instead of reducing the workforce, business owners are reducing the burden of labor costs through expedient measures, such as cutting bonuses and meal costs. Reports of reduced bonuses due to higher minimum wages were most frequent with 35 cases (45%). Companies included the regular bonuses, which they provided two to three times every year, in the base salary to meet the higher minimum wage. There were sixteen cases where companies had stopped providing fringe benefits, such as money for meals, and fifteen cases where the company reduced the monthly working hours by increasing the break time. Companies took advantage of the fact that bonuses and fringe benefits are not included, but the base salary is when calculating the minimum wage.

However, the company unilaterally altering the wage system or working hours without the consent of workers is a violation of the Labor Standards Act. There were more than a few cases where the reports claimed that the company "unilaterally posted a notice," and that the workers simply received a "verbal notice." The Ministry of Employment and Labor plans to crack down on businesses that resort to such expedient measures from January 29.

Workplace Abuse 119 said, "Among those who reported such cases, there were workers in small businesses, but there were also workers who worked in general hospitals, franchise cafes, seolleongtang restaurant chains, and partner firms of large companies and public enterprises. Large businesses and public enterprises that should lead others in upholding the law are openly resorting to illegal and expedient measures to work around the higher minimum wage."

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