National minimum wage which covers the whole of south korea Essays

National minimum wage which covers the whole of south korea Essays National minimum wage which covers the whole of south korea Essay National minimum wage which covers the whole of south korea Essay Introduction The 3rd edition of Collins dictionary defines that the minimal pay is the lowest pay that an employer is allowed to pay an employee harmonizing to a jurisprudence or understanding. South Korea introduced the minimal pay in 1988 with the intent of stabilising low-paid workers life and bettering the quality of the labour force, thereby lending to the stable development of the national economic system. ( Minimum Wage Act, Article 1, 1986 ) Since so, South Korea has have one national lower limit pay which covers the whole of South Korea, even though there are assorted exclusions which are non applied, such as any concerns using merely households or relations who are populating together, those who are hired for family plants, mariners who are capable to the Seamen Act, trainees who are making on-the-job preparation during the first 3 months and workers with disablements who can be paid sub-minimum rewards pursuant to a certification issued by the Ministry of Labour. The minimal pay in South Korea in 1988 was 462 won ( KRW, a proxy 0.37 dollar at the current exchange rate: 1 $ =1,240 KRW ) , the minimal pay in 2009 is 4,000 won ( a placeholder 3.23 dollars at the current exchange rate ) . In instance of the US, the US federal lower limit pay in 2009 is 7.25 dollars and that of 1988 was 3.35 dollars. ( U.S Department of Labor, 2009 ) If we compare two states with 2008 lower limit pay which South Korea s lower limit pay was 3,770 KRW ( 3.41 dollars, at the 2008 mean exchange rate: 1 $ =1,105 KWR ) and the US federal lower limit pay is 5.85 dollars. Considered the gross national income per capita in 2008 which of South Korea is 21,530 USD and that of the US is 47,580 USD The World Bank, 2009 ) , the degree of the minimal pay in South Korea is non low, and moreover the mean increasing rate during the past 10 old ages in South Korea, which is over 10 % , is much higher than that of the US. But because of the recent economic depression, while the Minimum Wage Council ( MWC ) which is established in the Ministry of Labor to consider the lower limit pay and other related affairs, which is composed of three portion representatives workers representatives, employers representatives and the public representatives, deliberated the minimal pay in 2010, there was a large spread between workers representatives and employers representatives, even employers representatives who have offered a little addition during the last two decennaries made a suggestion that the minimal pay should be frozen or should be dropped. After the long deliberation, the minimal pay of the following twelvemonth fixed at 4,110 KRW which is the lowest addition degree during the past 10 old ages. Furthermore on 18th Nov. 2008, 31 members of the National Assembly from the governing party ( Hannara-party ) submitted the revised lower limit pay measure, in which included the debut of a regional lower limit pay and exclusion to the over 60 old ages old people. They claimed that the present minimal pay degree is rather high, becomes a load to little concerns, and finally causes the low-skilled workers unemployment. ( The National Assembly, 2008 ) The proposal of amending the lower limit pay act provoked the unfavorable judgment from the Labour Unions and some societal organisations. In this research, I will reexamine one facet of the revised measure, the regional lower limit pay debut into South Korea. The economic experts positions of the lower limit pay Harmonizing to conventional supply and demand curves, the monetary value of the merchandise is fixed at the equilibrium point, theoretically the labor market is the same. The monetary value of the labour market i.e. the pay settles at the equilibrium point ( Figure 1, at We ) where supply and demand meet together, hence there is no unemployment. But the minimal pay is settled at the certain degree which is largely higher than the equilibrium ( figure 1, at Wm ) with the certain societal and political intent, for illustration, the stabilisation of vulnerable workers supports and income redistribution. Economists say that the lower limit pay reduces employment in the sectors which it targets to cover and the lessening of employment outweighs the pay addition taking to lose low-skilled workers occupations. In figure 1, if the lower limit pay settees at Wm, so it causes the unemployment ( G-D ) and the sum of employed workers reduces from F which is the sum of the employed when the authorities does non step in in the labor market to D. This is the basic theory that most economic experts use when they mention the negative effects of lower limit pay George Stigler ( 1946, p358 ) points out in his article that the popular aim of minimal pay legislation-the riddance of poverty-was non problematic and a minimal pay could non vouch the low-wage members of wealthier families. He claims that the plan of increasing income must be supplemented by a plan of education-in diet, in lodging, in instruction. ( Stigler, 1946, p365 ) It is normally agreed in the field of economic sciences that the minimal pay is non an effectual device for extinguishing poorness. The brief history of the Minimum Wage The minimal pay was foremost introduced in New Zealand in 1894 in response to alleged perspiration shops workers work stoppages. ( Starr, 1981 ) Now most states in the universes including the US, France, Canada, Japan, China and the UK have the lower limit pay ordinance. Still there are a few states which do non hold the minimal pay ordinance such as Germany, Italy, Swiss, Sweden and Denmark. In instance of South Korea, the minimal pay act enacted in 1986 on the evidences of the Constitution. Since the enforcement in 1988, reflecting the economic and societal alteration, amendment has been made. But the appraisal about the minimal pay is different among people. Employers complain that the present minimal pay policy does non reflect the current concerns state of affairs and the alteration of the labor market ( MWC, 2008 ) . In contrast, labour brotherhoods argue that the current minimal pay is a really low degree and does non transport out the aim of minimal pay efficaciously. The arguments about its effects are still traveling on. Standards for puting minimal rewards Each state has its ain organisations and minimal pay make up ones minding process. Factors which affect the lower limit pay vary from states, in malice of the assortments ; we can by and large sort them into three chief factors, which are the demands of workers, ability to pay and the demands of development. ( Starr, 1981 ) Gerald Starr references that specifying meaningful standards is the chief key to guarantee the aims of minimal pay. ( Star, 1981 ) In South Korea, the minimal pay act article 4 provinces that a minimal pay shall be set after sing the workers life cost, labour productiveness and the ratio of income distribution and it can be set otherwise by the industry. There is a contention whether standards are meaningful or non, and how each standard can be measured exactly is besides a concern. Despite of the other statements about the minimal pay policies, I will non speak about them here. The debut of a regional lower limit pay into South Korea As I mentioned in the debut, the revised measure by Hannara-party is pending at National Assembly. This revised measure includes several problematic issues. The regional lower limit pay debut is one of them. Hannara-party claims that the lower limit pay has contributed to the low-paid workers supports ; meanwhile the recent fiscal crisis causes fiscal force per unit area to little companies, makes them go against the jurisprudence and accordingly is taking the occupation chance from the vulnerable on the job category. They say that there exists a spread to the life cost and between states. That is the chief ground to propose the alteration. ( NA, 2008 ) Under the present playing jurisprudence, there is no land that Ministry of Labour can put a different lower limit pay harmonizing to geographical countries. On the minimal pay act article 4, Ministry of Labour can put a minimal pay otherwise harmonizing to industries. But until now, Ministry of Labour has neer set the minimal pay otherwise by industries. Equally shortly as Hannara-party turned the measure in, Korean Confederation of Trade Unions ( KCTU ) made an proclamation that Hannara-party s suggestion is a menace to the basic function of minimal pay. The regional lower limit pay debut will do the society to widen the societal and economic spreads between the states and to intensify the emotional recreation. KCTU argues that the revised measure will do workers who work at the little companies where the lower limit pay is relatively low move to the higher countries i.e. Seoul or the other large metropoliss. In the long tally, the regional lower limit pay will non assist little companies in the local and rural countries but will destruct little companies. Furthermore, it will lay waste to the national economic system. Federation of Korean Trade Unions ( FKTU ) which is the other major associated brotherhood organisations besides expressed the same place about the revised measure with the KCTU. In contrast to KCTU s statements, the Korea Employers Federation expresses an understanding about a regional lower limit pay debut. KEF says the cost of life and the mean pay in each metropolis and each state is different. The monetary value in local states or rural countries is comparatively low, compared to Seoul and Kyeonggi province-so-called metropolitan metropoliss. But the present system-one national minimal wage- does non reflect this cost life difference, the pay spread and the structural difference in the labor market. Considered the intent of lower limit pay which is to protect the low-paid workers, puting a regional lower limit pay which workers can populate with instead than set uping one national lower limit pay is effectual to the national economic system. They claim that the jurisprudence should be revised and minimal pay can be set otherwise harmonizing to geographical countries. They argue that a regional lower limit pay is more appropriate to the nonsubjective pro tecting the low-paid workers. Through reflecting the monetary value difference and using otherwise to the countries, the regional lower limit pay will besides assist little companies from the labour deficit. But they say that the procedure to find the minimal pay should be reformed foremost, they express their concerns if the governments to find the minimal pay are given to each state and so the differences between employers and workers will decline. KCTU argues that KEF s thought is inarguable and the Hannara-party revised measure is a retrograde measure under the recent economic crisis, even it is against the Constitutional rules. Two major associated labour brotherhoods organisations say that they will continuously make street rally in major metropoliss throughout the county, and will demo their protestation against the revised measure, moreover do every attempts to protect the lower-class and to derive a Life Wage until the Hannara-party and the authorities will retreat the pending measure. Refering this facet, Uh soo-bong, a professor at Korea University of Technology and Education, said in the conference hosted by MWC in November 2008 that the regional lower limit pay debut could be considered if there is a important spread between minimal life costs harmonizing to parts. But he added that there is no nonsubjective grounds for that until now. Some states have the regional lower limit pay, for illustration, the US, Canada, Australia and Brazil. ( MWC, 2009 ) In instance of the US, the lower limit pay foremost was adopted by Massachusetts in 1912 to cover adult females and kids before the federal lower limit pay was adopted. Since so, several provinces besides adopted the minimal pay statute law. The Fair Labor Standards Act, passed in 1938, is the first federal lower limit pay ordinance. The President at that clip, Roosevelt, said that The jurisprudence was the most far-sighted plan for the benefit of workers of all time adopted. Wagess must guarantee a minimum criterion of life necessary for wellness, efficiency and general wellbeing, the act stipulated without well restricting employment. Ever since, even in the US, critics and protagonists have disputed over the minimal pay: some say it destroys occupations by doing it excessively expensive to maintain workers. Other economic experts note, nevertheless, that because a bulk of minimum-wage earners work in outsourcing-resistant service occupations, concerns will hold a difficult clip disregarding the workers massively. Research workers at the University of California at Berkeley found that after an 80-cent New Jersey lower limit pay addition in 1992, employment in the province s fast-food eating houses rose somewhat faster than in Pennsylvania, where the minimal pay did non alteration. ( Card and Kruger, 1995 ) Alternatively of killing occupations, lower limit pay protagonists argue, the pay floor additions productiveness and encouragements consumer buying power. Now many provinces in the US have minimum pay Torahs. Therefore an employee is capable to both the province and federal lower limit pay Torahs, the employee is entitled to the higher of the two lower limit rewards. Even though the federal authorities for about 10 old ages from 1997 to 2006 did non increase the minimal pay, each province has increased the province lower limit pay independently harmonizing to their ain determination. Despite of the unchanged federal lower limit pay, the provinces lower limit pay addition did positive function in betterment for workers. As you can see figure 2, the figure of the provinces which do non hold province minimal pay is 5 which lie largely in southern country, for illustration, Louisiana, Tennessee, and Mississippi. The figure of provinces which have the lower province minimal pay is 7 and that of provinces which have the higher minimal pay is 12. Canada has merely the provinces lower limit pay, Canada does non hold a national or federal minimal pay. In 1918, the province of British Colombia established the lower limit pay foremost, and so Ontario, in 1920. Each province in Canada has the authorization to make up ones mind the minimal pay independently. Canada has merely the provinces lower limit pay, Canada does non hold a national or federal minimal pay. In 1918, the province of British Colombia established the lower limit pay foremost, and so Ontario, in 1920. Each province in Canada has the authorization to make up ones mind the minimal pay independently. From the phase of the minimal pay debut, South Korea and the US were rather different. In instance of the US, Massachusetts foremost adopted the minimal pay, and a federal lower limit pay was foremost set in 1938. Even though the national minimal pay does non alter, the provinces set ain minimal rewards. The period 1997-2007 is the longest period during which the federal lower limit pay has non been changed. Many provinces have departed from the federal lower limit pay. Washington s lower limit pay is 8.55 dollars as of January 1, 2009. California and Massachusetts presently have minimal rewards of 8.00 dollars, meanwhile the federal authorities has minimum pay of 7.25 dollars. There are tonss of researches about the effects of lower limit pay, but there are non many articles about comparing to a regional lower limit pay and a national lower limit pay. David Card and Alan B, Kruger published Myth and Measurement: The New Economics of the Minimum pay in 1995. This book contains the cross-state comparings. The survey of employment in the fast nutrient industry after the 1992 addition in the New Jersey lower limit pay shows that employment was non affected adversely. In comparing to New Jersey and eastern Pennsylvania where the minimal pay remains unchanged, conducted before and after the addition in the New Jersey, they found that the employment in New Jersey really expanded with the addition lower limit pay. Second a cross-state analysis finds that the 1990 and 1991 additions in the federal lower limit pay did non affect adolescent employment adversely. They mentions most economic treatments of public policy are concerned with inquiries of efficiency: in ot her words, where a peculiar policy generates more benefits than costs. In their research, they claim the lower limit pay might raise the efficiency. In their positions, the minimal pay is chiefly a distributional issue. ( Card and Kruger, 1995 ) They come to a decision that minimal pay does non hold any negative effects to the employment. Their plants rekindled the differences among the economic experts. Kevin M. Murphy and Finis R. Welch, at a seminar in Washington in 1995 held by the American Enterprise Institute, claim that their research was prejudged and hence, biased. Murphy and Welch besides point out that systematic differences in province labour markets can evidently bias cross-state comparings of employment as steps of lower limit pay effects. ( Murphy and Welch, 1996 ) Card and Kruger s book has a different position from the normally agreed thought, but ignores the possible effects of an addition in the minimal pay on cost of populating. They study an facet of the cost side of a higher lower limit pay its consequence on houses profitableness, but they do non hold the satisfying results for the distribution side. Introducing a regional lower limit pay into South Korea is another narrative from the US. Each province of the US regulations independent politically and socially. It has own Torahs which have settled from the long history. As you can see the difference graduated table in two states, the system of two states is the more of import facet. Are there any demands to present a regional lower limit pay into South Korea? Is the difference of cost life between states large plenty to see a regional lower limit pay debut? While Hannara-party and employers claims that the cost life and the monetary value of trade goods in local countries are comparatively low, consumers monetary value index shows that there is no difference between states. Furthermore, harmonizing to the consequence of the regional pay and working hr study by the Ministry of Labor, Seoul, Ulsan, Taejeon and Kyeong-gi are the highest states in the monthly pay, Jeju and Jeonbuk is the lowest country. Jeju and Jeonbuk are considered as a low country of cost life, Seoul is considered as the most expensive metropolis to populate in. If a regional lower limit pay is introduced for little companies in local states, the minimal rewards of little states will be probably to lower than that of large metropoliss, which will do the spread of pay bigger. We can state that table 3 demonstrates the present pay reflects the cost life and the monetary value of trade goods. Decision The ultimate end of minimal pay is for the stabilisation of low-paid workers, non for the benefits of concerns. Even under one national lower limit pay, the spread of the mean pay between states is large. The mean pay in alleged local states which assume that the cost life is instead low is the lowest degree. The debut might decrease the fiscal load in the short tally, but in the long tally, economic polarisation will intensify. And South Korea has a different political system from the US. Each state is non separate in politically and socially. That is the other facet which makes the debut hard. Card and Kruger said minimal pay has no consequence to the employment through the empirical research of New Jersey and Pennsylvania, but they did non see each province s cost life. As Stigler said in his paper, for little companies, the direct subsidy instead than minimal pay might be a better solution. ( Stigler, 1946 ) Mentions George J. Stigler The American Economic Association Vol 36, No 3 ( Jun.,1936 ) pp 358~365 David Card, Alan B, Krueger Myth and Measurement the new economic of the minimal pay, Princeton university imperativeness Princeton, New Jersey,1995 The effects of the Minimum pay on Employment,