Korea’s Double Jeopardy of Low Minimum Wage and High Prices

Article from SBS:

Grocery Shopping on Minimum Wage Bears an Empty Cart

This picture has been trending lately across the internet.

england min wage grocery

This is the result of grocery shopping with 23,000 won [20.87 U.S. Dollars], the amount of money one could earn from working two hours at minimum wage in Britain.

A wide range of food can be purchased, including 780 grams of pork neck, strawberries, tomatoes, mushrooms, and even milk.

What standard of food can be purchased on Korea’s hourly minimum wage of 5,580 won [5.05 U.S. Dollars]?

We took the 11,160 won yielded under the same assumption to the supermarket.

min-wage-groceries-##

After purchasing 180 grams of pork neck that costs over 2,600 won per 100 grams, relatively cheap bananas and potatoes grown in the Philippines, ramyeon, and water, the bill already comes to around 11,000 won.

The difference between Britain’s shopping cart is immediately visible.

SBS News college reporter Kim Min-young, “You really can’t buy anything when trying to get groceries on the minimum wage. Not only is the wage low, but prices are high, leaving consumers feeling bitter.”

The SBS New Media Department’s News Team investigated shopping carts filled on minimum wage that were submitted by netizens from other countries.

From countries around 13,000 won like the Netherlands and Germany, to the U.S. and Japan with wages at 7,000-8,000 won, the contrast with Korea was still distinct.

When you factor in purchasing power, South Korea has a relatively low real minimum wage.

Kim Min-su, Head of the Youth Community Union, “Low income workers must feel a huge burden when trying to fill their refrigerators and cook for their families on this amount of money. The need for a large, adequate increase in the minimum wage is apparent.”

South Korea falls towards the bottom with the 17th lowest minimum wage when compared to the 25 OECD countries .

In minimum wage negotiations that started June 18th, workers are demanding a 10,000 won increase while employers are fighting to freeze the current wage.

The Minimum Wage Council is scheduled to decide next year’s minimum wage by June 29th.

Comments from Naver:

bok_****

The government rolled out the coexistence reform policy without agreement from labor to increase employment by adding part-time jobs and wage peak jobs. They knew there was a problem with the consumer price index but just ignored it because it was low. They ignored the quality of jobs created despite President Park’s promises just so they could raise the employment rate. Despite the trillions of dollars large companies are rolling in, the government throws more money at them in the name of economic recovery while telling workers to tighten their belts. Plus Kim Moo-sung, a candidate for the next presidential election, says stupid things like dealing with corrupt employers or confronting bosses who don’t pay their employees is within the capacity of students working part-time jobs.

dkfl****

Think about the intensity of the work

mona****

Hell Korea indeed! This is how hell’s citizens live.

gust****

Noraebang “doumi” get 30,000 won an hour that’s too much investigate for price fixing.

kami****

Our country’s prices are too high… intermediaries between producers and consumers that jack up prices are thieves

dbtl****

I know because I lived abroad. The wages are twice that of Korea while the prices are similar.

sunn****

The people who demand a wage freeze while the prices keep rising are just sitting around spewing nonsense.

blue****

Economic Deputy Prime Minister Choi Kyung-hwan said that if prices continued to stay low we’d have a crisis hahaha his salary of $90,000 a year is indeed a low, low price bahaha reality is outdoing even Gag Concert [popular sketch comedy show].

anal****

It’s really fascinating… Koreans seem to have the blood of slaves running through them. To the extent that it’s a miracle there haven’t been riots. When I looked at the comments last time, there was a convenience store worker making less than the minimum wage who was scared his store would go out of business hahaha

ccoy****

I don’t care if you lower consumer prices, raise wages, or lower housing prices, just do something~~ the problem is that consumer and housing prices keep going up while our spending money remains at a standstill, isn’t it

hamb****

Korea has a weak minimum wage but the problem lies in prices… Today’s prices are outrageously expensive.. do we really think raising minimum wage will solve that? Prices will just rise proportionally lol

bike****

We need to lower prices keke

twee****

Wages are agonizing when compared to prices seriously

broo****

Most places don’t even pay the full minimum wage

hwan****

That’s weird, didn’t the deputy prime minister say we were experiencing a price slump…

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  • 금정산

    The minimum wage is too low considering living expenses. The overpriced groceries however are nothing compared to the exorbitant housing market. This is what really kills people. You can shop for tuna or beans instead of pork, but there isn’t a similar option with housing. #neoliberalist pigs

    • chucky3176

      Minimum wage of $5.10 an hour is about right for South Korea’s per capita income. But these idiots want to raise the minimum wage to $10 an hour in one shot, which is in the territory of the US wages. US has a much higher per capita income with higher productivity rate. Doubling the minimum wage over night as demanded by the thousands of protestors on the streets last week, the unemployment will skyrocket as many small businesses wouldn’t be able to keep their workers anymore.

      The wages in South Korea are not the problem. Average wages in South Korea is one of the highest in Asia, even higher than Japan, but with lower productivity. And if you look at after deduction of taxes, South Korea’s wages is one of the top ten in the world. For instance, Hyundai Korean auto assembly workers in Ulsan, now earns more than workers in Toyota and BMW without being able to match those two companies in productivity. The high wages have really hurt the country’s export competitiveness.

      http://news.hankyung.com/nas_photo/201506/AA.10146831.1.jpg

      If South Korea really wants to lower prices, totally revamp the fucked up ancient distribution system where layers and layers of middlemen are getting their share of cuts which raises the prices on all goods. Simplify the distribution system which will mean many distribution companies will go bankrupt putting lot of people out of work. But it will lower prices for all, and there will be more Koreans who can afford to buy more things, which recirculates back into the economy.

      However the government can’t see the forest from the trees, so they will do anything to protect these middle men companies at the expense of consumers.

      • redwhitedude

        That’s easier said than done. Simplifying distribution because there are a lot of vested interests to keep it like that and a lot of people profiting from it. What Korea needs is somebody like Amazon to really barge in there and stir things.

      • 금정산

        The South Korean average may be $31,000, but the minimum wage is for the poorest in society.

        Say the minimum wage is $5.10,
        Assume 40 working hours per week over 52 weeks of the year.
        => $10,600 per year.

        There is no way someone could save for their own dwelling and support themselves. Hence the greater problem of financial independence.

        Japan has a higher minimum wage, 780¥ vs 5580‎₩. Nowadays the cost of living in South Korea is arguably as high as Japan (however Tokyo more exensive than Seoul). Look at the house prices.

        http://www.economist.com/blogs/dailychart/2011/11/global-house-prices

        Or an index for the cost if living (rent is a dominant factor). You will see that South Korea has surpassed Japan.

        http://www.numbeo.com/cost-of-living/rankings_by_country.jsp

        Also, “doubling” the minimum wage is a bargining tactic. I don’t believe the argument that if the minimum wage increases, small businesses will fail – because wages are a small fraction of business expenses. A dude who owns a GS25 only needs to hire one employee for the counter, say currently $30,000 for the year. This is little compared to his lease, franchising fees and overheads.

        • chucky3176

          “Japan has a higher minimum wage, 780¥ vs 5580‎₩”

          So Japan’s minimum wage is only about $1 and change higher than S.Korea’s. With a higher cost of living in Japan, that $1 difference is not very impressive, but Japan’s productivity is much higher than Korea. Do you think Korea having a higher minimum wage than Japan makes sense to you?

          And I’d like to know how your link’s stats came up with Korea’s rent index, when Korea’s rental market is dominated by the Cheonsae system, which is an unique system that’s only found in Korea. It’s one time massive deposit (of up to $250,000) for the right to rent, versus the rest of the world where you pay a fixed monthly rental charge. How can they compare the two completely different systems?

          “but the minimum wage is for the poorest in society.”

          Simply not the case in Korea where there are thousands of jobs that pay 2 million a month go begging, so they have to import one million foreign workers, because they are 3D manual jobs that nobody wants. Poor people who want to work in service jobs for minimum wage, rather than toil in factories, that is another problem right there.

          • 금정산

            1. The minimum wage in Japan is 20% higher. Japan used to be considered expensive and South Korea used to be considered cheap. You can still think the old way if you like, but the tables have turned. The cost of living in South Korea is higher than Japan (but Tokyo is still more expensive than Seoul).

            2. It was fair to compare the rents between South Korea and other countires because the jeonse system was considered as “bond money”, not rent. Under jeonse, the tenant does not receive any interest on the bond and this is another expense which wasn’t factored (it would make South Korean rents even more expensive if included).

            3. People refuse those manual jobs because they are made to work like mules and don’t want to face the shame from others. Sure, if people were really hungry, they would take the job and pick up a shovel. But not many people over 40 can still do that. There are people in their 40s and 50s who live alone (in a goshiwon) and struggle to make a living. There are people in the 30s who need to study and work part-time. Not eveyone has a good family relationship and can be supported by others.

          • Xman2014

            That’s kind of distorted data because South Korea has higher average wages than Japan. Higher wages means higher cost of living due to higher inflation (brought on by higher cost of labor). Just taking minimum wage when most people are not on minimum wage, gives you an highly inaccurate picture. The mean average wage in South Korea is not $5 an hour minimum wage.

            This graph gives you a better ideal, which takes into consideration the disposable income after taxes that calculates into the cost of living index.

            And as you can see, South Korea’s cost of living is still way down the list.

            http://www.nationmaster.com/country-info/stats/Cost-of-living/Average-monthly-disposable-salary/After-tax

          • Paranoia Teitaikyo

            What a bunch of dumbass still comparing whatever to Japan. You dont fucking care about Japan or whatever Japanese-ness do yu? lol

          • Xman2014

            I’m just responding to 금정산’s claims. Nothing more.

        • Xman2014

          Work hours maybe officially 40 hours per week, but it’s probably around 60 hours when you factor in the fact that most Koreans do unpaid overtime. That’s probably 10 hours per week doing real work, and 50 hours probably wasting time waiting for the bosses to leave first, and rest of the time drinking with the bosses to get on their good sides.

          How about eliminating this loophole first through legislation, and protect the workers. Just increasing minimum wage will do jack shit to address these issues.

          • 금정산

            Those are big questions.

            I think Koreans lack the will to stand up againt their superiors, so they work overtime and accept the work-life balance; and Koreans are still driven by the older generations who insist on survival by making money, so that is why they focus on pay packets.

  • 금정산

    And if you don’t know what a 노래방 도우미 is, you can do an image search.

  • redwhitedude

    The temptation might to blame the stores for charging high prices or low wages solely but I also think it might be overly protected agricultural sector. This obviously not a politically correct view in Korea but when you have domestic rice being so much more expensive than imported rice and as a result foreign rice being restricted to protect farmers then you pretty much are forcing consumers to swallow the high price. Who’s side is the Korean government on? The farmers who are a tiny minority or the average consumer who is forced to buy high priced items.

    • TheDickinDixie

      You only have to look at the lobbying, and the ‘gifts’ at Seolnal and Chuseok to see whose side the politicians are on.

      • redwhitedude

        Obviously the country needs to thinking. Instead of favoring the producers especially the domestic ones shift towards favoring the consumers and you know what that entails.

  • NondescriptRG

    They should try the same shopping experiment in Russia where the official minimum wage is about 1 USD per 1 hour. Now that would be some fun.

  • commander

    Whether to hike minimum wage is a controversial, but necessary issue that Korean society has to deal with.

    But the way the article compares Britain and S. Korea in purchasing power of hourly minumum wage is not persuasive as two countries has less in common than in differerence in economic terms such as per-capita income, labor market structures, economic development stages etc..

    One of good ways to steer public attention to the the minimum wage issue is to bring up a polarized gap between regular and irregular workers in their salaries. The former, backed by militant labor unions is guaranteed wages above legal minimum wages with extra protections, while the latter is often exploited by illicit, nasty practices who leave irregular workers with a meager amount of pay, which barely cover their living expenses.

    • chucky3176

      The labor unions don’t want any labor reforms to minimize Korea’s increasingly polarized labor system which increases part time/temp workers without benefits. This country badly needs major labor reforms. The government proposed a system where they would allow businesses to easily lay off workers, and to make the pay raises depended on job performances rather than on age and seniority. To address all the reasons why businesses and companies are reluctant to hire permanent full time jobs, when it makes much more sense to hire temp workers who they can lay off when their business slows down during a recession. But the labor and the Korean people don’t want to have any of that, as they want guaranteed jobs for life. This mentality puts South Korea in a unique situation with the only third world labor system in the OECD.

      There are many complex factors why South Korea breeds such poor living standards. Unfortunately there are so many Koreans who are delusional into thinking that simply by just raising the minimum wage will fix everything. They want North European living standards, but when asked to change the structures of Korea’s labor, society, law, government, and business to make it similar to North European paradises so that Korea can reach those goals, most Koreans will not be willing to make any changes. They will say those systems do not fit with Korean way. They naively think just creating social welfare system out of thin air, and raising the wages by double, will suddenly turn South Korea into another Norway. Hardly anybody thinks of what’s under the hood when looking at a beautiful shiny car.

  • HaydenG

    You can’t raise a wage with a minimum wage. Are these people so stupid? Why not just raise the minimum wage to 100,000 won an hour. Then everything will be magically solved.

  • takasar1

    a) korea is an industrial, export-dependant economy, where tight cluster networks and an overly complex distribution system, lead to palm greasing, lobbying and intense ‘gift-buying’, thereby creating a sort of ‘dead-weight’ as a result of inefficiency and nepotism. of course you get this in almost all economies but in korea, circumstances exist to exascerbate the problem.

    b) almost anything can be explained by supply and demand, with wage growth being no different. if the labour market is tight, openings-applications ratio is high and the macro-economic climate is good (high capex, low rates, etc), then wages naturally rise. yet in korea, how many $3’000 a month jobs go amiss because stupid, ignorant damn kids have drunk the ‘im-better-than-that’ coolaid??

  • TalkStraight

    Problem with Koreans. Expensive Price is equal good. 90 percent of Koreans think this way!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  • That’s marvelous

    As an expat I get a ‘cost of living allowance’ to compensate for purchase power difference between Netherlands and Korea. This year, Korea is 55% more expensive. One potato or one apple costs as much as one kilo back home.

    But what can you do? Korea is effectively an island with too many mountains, which leaves very little good agricultural land for anything besides rice and cabbage.

    I think minimum wage is harsh, but it’s also good for economic growth.

    • chucky3176

      South Korea is currently under a severe drought condition. Prices of produces are high due to lack of supply caused by the drought. However that’s negated by the fact that the low oil prices have given the consumers a break in other consumer areas. Prices on imported luxury goods have also been slashed, as luxury brands begin to struggle. The net result is that the consumer price index increase is still around 1% which is on government target to avoid the dreaded deflation. Of course that doesn’t eliminate the fact that produces sold in Korea are always high priced due to geographic constraints. I guess the best answer for this is for Korea to slash tariffs on all agricultural goods and let the cheaper good quality imports from the US/Canada/Chile/Mexico/Australia to enter and flood the market, while keeping out the dangerous and dodgy Chinese imports out.

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