Korea's minimum wage system fails to protect the underpaid

Last year, Kim Sang-sik agreed to work long hours on low wages as a building night guard in Incheon after several job-hunting attempts ended in vain.

The 32-year-old worked from 7 p.m. to 8 a.m. every day, but received only 1.3 million won ($1,140) a month for his 13-hour days of labor. When he took a day off, 50,000 won was deducted from his wages each time.

The pay was far lower than the stipulated minimum wage of 5,210 won per hour for 2014, but he continued to work there for lack of other options as his employer remained undetected.

Kim was one of more than 2.3 million workers who were paid less than the minimum wage last year, which accounts for an estimated 12.4 percent of the nation’s salaried workers, according to a report by the Korea Labor and Society Institute.

The number of staff underpaid by employers dwindled after reaching a peak in the aftermath of the 2008 financial crisis, but it started to rise again in 2013, hitting a decades-record high last year. 

With the minimum wage set to rise to 6,030 won next year from this year’s 5,580 won, the number of below-minimum wagers is likely to further increase.

While business leaders cite an “extremely high minimum wage” as a reason behind failure to pay the minimum wage, the labor circle accuses the government of neglecting its duty to crack down on the employers underpaying workers. 

“The drastic hike in the minimum wage has put a burden on small and mid-sized employers, leading them to fail to pay their staff the minimum wage amid worsening economic conditions,” an official from the Korea Employers Federation told The Korea Herald.

“Unless the minimum wage is stabilized, only payments below the legal rate will increase,” he said, noting that the 8.1 percent rise in the wage for next year is far more than the inflation rate of 0.5 percent.

The labor bloc, however, pointed out that the underpayment resulted from the government’s lack of law enforcement, not from the minimum wage hike.

“The government only gives a slap on the wrist for employers’ failure to pay the minimum wage,” Park Sung-sik, a spokesperson for the Korean Confederation of Trade Unions, told The Korea Herald.

“It should send a clear warning to society that those who fail to pay their workers the minimum wage will face tough consequences.”

He also pointed out what really takes a toll on small employers is sky-high rents and a distorted market structure dominated by big employers, describing the employers’ claims as “nonsense.”

According to the report by the KLSI, the young, the elderly, women and temporary workers were most likely to be paid less than the minimum wage.

Among workers aged under 25, 28.4 percent of them received below the minimum wage. Moreover, nearly 37 percent of working university students were illegally underpaid, hinting that young part-timers are most vulnerable to underpayment.

About 29 percent of seniors aged 55 and over were not paid the minimum wage.

Women stood a higher chance of receiving lower than the legal wage, with 18.3 percent of all women workers being underpaid, over twice the number for men at 7.8 percent.

One in 4 temporary workers were paid less than the legal rate, while only 1.7 percent of workers in permanent positions are underpaid.

Kim Yoo-sun, the author of the report and senior research fellow at KLSI, pointed out that the growing number of underpaid workers is associated with the government’s lack of will to punish employers who pay their staff exploitive rates.

“There have been no clear disadvantages for the employers who sidestep the minimum wage, which prompt them to continue to violate the Minimum Wage Act,” Kim told The Korea Herald.

The Minimum Wage Act stipulates that employers found to be breaching the law face a penalty of up to 20 million won or three years in jail.

But the government has been passive in taking legal action against the lawbreakers, only cautioning them to pay back the amount they owe their workers without imposing punishment, Kim pointed out.

From 2012-14, the Ministry of Employment and Labor identified 16,777 employers who failed to pay their staff the national minimum wage.

The ministry, however, filed lawsuits against only 34 businesses and levied a financial penalty on just 14 employers, meaning that a mere 0.3 percent of the employers caught underpaying their staff were punished by law.

According to another report by civic group People’s Solidarity for Participatory Democracy, the number of employers found to have violated the Minimum Wage Act by the government has decreased, with the figure dropping from 9,051 in 2012 to 1,645 last year.

While the ministry attributes the drop to raised awareness among employers, the organization views it as a result of scaled-down monitoring by the government.

The number of workplaces the government monitored plunged from 23,760 in 2011 to 13,280 in 2013, the report noted. As of June, 5,661 workplaces have been monitored this year.

The government, for its part, maintained that the number of crackdowns or legal actions against the law-breaking employers does not translate into the “quality” of the efforts they have made.

“The low rate of legal actions against the employers means that they have corrected their wrongdoings after the government cautioned them,” a ministry official said, noting that they focus on ensuring workers are paid the money they deserve rather than taking outright legal actions against the businesses.

“We give the lawbreakers a warning first, and if that doesn’t work, we deal with them by law,” the official said. “It is practically difficult to monitor all the employers totaling 1.7 million with merely 999 inspectors from the ministry.”

The ministry told The Korea Herald that it is considering increasing the number of inspectors overseeing the minimum wage breach cases at workplaces and revising the Minimum Wage Act to more effectively induce employers to abide by the law.

The revised bill, submitted to the parliament last year, will allow the ministry to immediately impose a financial penalty on employers underpaying their staff when they are detected.

Under the current system, it takes two to three months to make the employers take responsibility for their unlawful act, the official added.

By Ock Hyun-ju (laeticia.ock@heraldcorp.com)