Minimum Wage Effect on the Manufacturing and Service Industry : Wage and Employment Structure

The purpose of the minimum wage is to stabilize a worker’s life and improve the quality of the labor force by guaranteeing a minimum level of wages, thereby contributing to the sound development of the national economy (MINIMUM WAGE ACT.)The Minimum Wage Council (MWC) consists of 27 members who are appointed by the President once they are nominated by the Ministry of Employment and Labor.The members are divided into three represented councils of Workers, Employers and Public Interest, and each group constitutes of 9 persons.The MWC determines the minimum wage for the next year until August 5 annually after reviewing the cost of living, wage status of comparable workers, and various indicators such as economic growth rate, employment, prices, labor productivity and income distribution.Nowadays, the minimum wage is almost decided by Public Interest Council because it is difficult for the Worker and Employer Councils to reach agreement. Actually, the Workers Council insists that raising the minimum wage would increase the worker’s average wage and reduce the income inequality. On the other hand, the Employer Council urges that raising the minimum wage reduces the employment rate due to diminishing the demand of labor. Particularly, the marginal firms encounter difficulty withstanding the heightened minimum wage