South Korea's increase of the minimum wage will boost private spending, which in turn can help Asia's fourth-largest economy break from its low growth trend, a senior government official said Friday.
In July last year, the country decided to raise its minimum wage by 16 percent to 7,530 won (US$6.60) for 2018, marking the biggest jump in about two decades.
Although the minimum wage hike is one of the government's strategies to boost private consumption and narrow the income gap, small and medium-sized businesses expressed concerns about higher labor costs.
The government has earmarked 3 trillion won to reduce the burden on smaller firms that hire part-time workers.
"There are also concerns about rising inflation stemming from the minimum wage hike, but inflation is expected to remain at a manageable level," Koh Hyeong-gwon, deputy finance minister, said in a meeting with senior officials from other ministries.
The minimum wage hike is the starting point for easing income polarization, and it could create a virtuous cycle of corporate investment and growth as well, he said.
The government is determined to further raise the minimum wage to at least 10,000 won by 2020 on the belief that it is time to break the economy away from an export-dependent growth path. Policymakers have emphasized that the average household should earn more and that the government must strive to offer quality jobs with good pay.
Meanwhile, Finance Minister Kim Dong-yeon urged small shop owners to support the government-spearheaded income-led growth policy.
"The minimum wage hike is vital to securing a worker's basic right to live, and it works to boost private spending, which eventually would be helpful to shop owners," Kim said during a visit to a small shop in central Seoul. (Yonhap)