South Korea And Minimum Wage

This article is about South Koreas job market which in November 2018 may have improved, but not for menial laborers who suffers from the largest job loss in the recent 5 years. Mainly due to government intervention in the labour market. Since they put in minimum wage as the article stated. The goal of minimum wage is to raise the living standards of a countries citizens by making the legally accepted minimum wage a person can receive higher than before as they have done in South Korea, raising it by 16.4%. They are even set to raise it by another 10.9% this year. But still the number of unemployed workers is still going up, the largest since the Asian financial crisis in 1999 and it is menial workers such as delivery drivers, parking lot attendants, cleaners, janitors and many more people that are hit the hardest. “Menial workers tend to be more vulnerable to economic risks” it is stated in the article. The people who need the most help is at lost while the rest get it even better.

The minimum wage raise is meant to help some of the most vulnerable groups of society, but conditions are only worsening for them. While it has good intentions and give help to some raising their wages it would also raise the production cost which then raises the price of the good or service and with higher prices demand decreases meaning less workers would be needed.

The aims of minimum wage are the equity justification meaning that you should be given a fair rate of pay proportional to your skills and experience. Also, labour market incentives to get people to start looking for work so thereby boosting the economy labour supply. Lastly there is also the labour market discrimination. Adjusting minimum wage could be used as a tool to offset discrimination towards many low-paid female workers as well as younger employees.

The disadvantages include higher competition for jobs since less will be able to be employed when it costs more to do so. Less jobs will be available, raising the unemployment. The relative poverty will also be affected. Since middle-income households tend to be boosted by raising the minimum wage while menial workers will be left behind since they have the lowest wage and the middle-income households are above the minimum wage.

Increasing the minimum wage shifted the diagram from the equilibrium which decreased the quantity of labour. But it could theoretically have shifted it positively (to the right) instead to a higher quantity of labour, but that did not happen in South Korea. In a standard minimum wage diagram, it suggests that putting in a pay floor/minimum wage, will lead to contraction of employment. But that also depends on what the minimum wage is put at.

But by looking at my diagram you can see that the original quantity moved to Q1, but it could of just as easily have moved to Q2. But this is not the case for South Korea but how can this then be solved? By giving their population education and training to help reduce structural unemployment or they could also give out geographical subsidies meaning that the government intervenes to provides resources depending on your location. So that firms will get more encourage to invest in less fortunate areas.

Or the solution I would pick for South Korea is to lower the minimum wage. Because by lowering the minimum wage more people could get back into the job market but still people should be able to raise above the minimum wage line. But have more opportunities with lower starting salaries to get into the job market with a chance to improve rather than not having a job at all.

I believe that South Korea should instead prioritize to put measures into making more people want to do a work career that you get the opportunity to get increasingly qualified jobs and thereby higher salaries