SEOUL -- South Korea is hitting the brakes on its push to raise wages for low-income workers after previous steep hikes dragged down employment and economic growth.
The minimum hourly pay for 2020 will come to 8,590 won (about $7.30), the Minimum Wage Commission said Friday -- up just 2.9% on the year. The body includes representatives of labor and management.
A far cry from the 16.4% jump of 2018 and this year's 10.9% hike, the 2020 raise will be the third-smallest since the minimum wage was introduced in 1988.
The announcement drew immediate fire. President Moon Jae-in had pledged to raise the minimum wage to 10,000 won by 2020. But now, pundits see doing so even by his final year of 2022 as a tall order.
Moon's signature policy of income-led growth to stimulate consumption and the economy has shown no results so far. Higher minimum wages have led to layoffs by small-business owners unable to afford them. Unemployment worsened to 4.5% for January, when the minimum wage rose 10.9%. June's jobless rate of 4% improved on this but remained above the 3.6% of May 2017, when Moon took office.
The economy, battered by such factors as a slump in semiconductor demand, is expected to expand just 2.5% for 2019 -- the slowest in seven years and weaker than the 2.7% growth of 2018. With big companies in conglomerate groups bracing for lower profits, the government apparently worried that sharply raising wages would cool the economy further.
Moon expressed regret in May for the problems that previous hikes had caused for small-business owners and low-income workers. He also said there was no need to be bound by the 10,000 won pledge.
The Federation of Korean Trade Unions called the government's promise to tackle economic inequality a "hollow slogan" in a statement Friday.
To dodge criticism of the government over wages, the ruling party is linking the issue to another recent target of public ire: Japanese export curbs on chipmaking materials.
The moderate wage hike "shows the dedication of labor and management to come together to fight the crisis brought on by Japan's economic retaliation," a spokesperson for Moon's progressive ruling Democratic Party of Korea said Friday.