The controversy over the minimum wage heated up as the Korean government unveiled a draft of the minimum wage decision system on January 7. The issue of “decision method” has been added to the minimum wage issue, which has been focused on the rate and amount of increase. As new issues emerge, attention is focused on the minimum wage decision system in countries around the world.The minimum wage decision structure can be largely divided into the ▲ Council decision method ▲ Government (administrative agency) decision method ▲ Separate committee decision method ▲ Group agreement decision method. Looking at the decision-making methods of major countries, the U.S. takes the way Congress decides, Spain and France take the way the government decides, and Australia and Japan, including Korea, take a separate committee decision method.
■ U.S. Goes through Law Revisions…Can be raised by referendum
In the United States, the federal and state governments decide on the minimum wage, respectively. The federal government is the Fair Labor Standard Act (FLSA), a federal corporation, and the state governs the minimum wage with the minimum wage laws of each state. The minimum wage level is determined by the federal and state legislatures, respectively, and the decision method proceeds in the same way as the general law revision procedure.Since Congress decides the minimum wage through the revision of the law, there is no separate renewal cycle, and the decision criteria are not specified. If necessary, Congress collects various opinions and determines the minimum wage level according to the law revision procedure.
The minimum wage is applied at a higher level between the federal and state minimum wages. Currently, the federal minimum wage is $7.25 (about KRW 8,109 as of January 14), which has been frozen since 2009, and most states set a minimum wage equal to or higher than the federal standard.
Meanwhile, the minimum wage will be raised in 20 states and 40 cities this year. A dollar per hour rose at workplaces with more than 26 workers in California, and the minimum hourly wage rose to $15 at many workplaces in New York City.The minimum wage hike through referendums is also notable. In Missouri, when the state legislature did not raise the minimum wage, residents voted to pass it. The minimum wage in Missouri was raised from $7.85 to $8.60 (about $9,619) and raised to $12 over five years. According to multiple media outlets in the United States, six out of 19 states raising the minimum wage this year decided to raise it through a referendum.The widespread move to raise the minimum wage seems to have been affected by the “Fight For 15” movement. The movement began in 2012 when 200 New York City fast-food workers demanded $15 an hour and union rights. Since then, the movement has expanded nationwide and public opinion has been formed to raise the minimum wage. In the end, politicians who recognized public opinion are realizing the minimum wage hike by revising minimum wage laws and ordinances.
■ Spanish Government Decides Biggest Increase in 40 Years
Spain and France are representative countries where the government decides the minimum wage. In Spain, the government determines the minimum wage after discussions with representative trade unions and management organizations in consideration of the △ consumer price index △ domestic average productivity △ labor participation growth rate for national income △ overall economic situation.It does not operate a separate minimum wage committee, but holds preliminary consultations with labor, management and the government every December to determine the minimum wage. The Dirección General de Empleo will draft a minimum wage standard based on the standards established in the Employment Agreement and Collective Negotiations, a representative agreement between labor and management. The draft is presented to the labor-management government meeting and used as basic data for preliminary consultations on minimum wage standards. However, prior consultation may be replaced by written consultation, and the result of the consultation is not binding.The Minister of Employment and Social Security proposes the standard to the Cabinet, and it will be finalized after a vote. The revised minimum wage will be announced in the official gazette under the Real Decreto, and will take effect on January 1 of the following year. It is characterized by the fact that the revised minimum wage does not apply to the wage system and amount of workers exceeding the minimum wage (annual wage).Spain’s minimum wage, which was lower than that of advanced Western European countries such as the UK, Germany, and France, will rise sharply this year. Spanish Prime Minister Pedro Sanchez announced on December 12 last year (local time) that he would raise the minimum wage by 22%. This is the biggest increase in 40 years.Spain needs parliamentary consent to secure a budget to support the minimum wage. Initially, it was expected to have difficulty seeking consent from the opposition party in the form of a ruling and opposition party, but the revised minimum wage bill reportedly passed the National Assembly on the 21st of the same month
■ French Expert Group Similar to ‘Expert Commissioner’ Model, Reorganised by Chief Executive
France, like Spain, has a structure in which the government decides the minimum wage, but the difference is that “Grouped’ experts” participate in the discussion process. The participation of the expert group is the most similar to the establishment of an expert committee on setting the minimum wage section among the minimum wage decision system announced by the Ministry of Employment and Labor.An independent expert group consisting of five experts with experience and competence in the economic and social sectors was established in December 2008 as a new committee involved in determining the statutory minimum wage (SMIC). Every year, the National Committee for Collective Negotiations (CNNC) and the government submit reports on the rate of increase in SMIC. The expert group is not instructed by the administrative authorities in relation to the work and complies with the confidentiality of the work. Each expert is recommended by ministers in charge of labor, employment and economy, and appointed by the Prime Minister.However, since the government nominates all expert members, there are criticisms about the composition. The French trade union FO (power of trade unions) said in August 2017 that it was concerned that “only pure economists with strong liberal tendencies were included in the committee’s composition, and sociologists were excluded.”When a group of experts submits an SMIC report, the Ministry of Labor will hold a “national committee for collective negotiations.” The government submits a report on the national financial analysis and economy to the National Committee for collective bargaining, and then decides the SMIC increase rate at the Cabinet meeting by combining the opinions of labor and management representatives presented in the statistical index △”National Committee for collective bargaining” prescribed by the △ Administrative Order. The adjusted SMIC is published and announced in the official gazette and applied on January 1 every year.Meanwhile, the French government has the power to decide on an increase in SMIC at any time at the discretion of the government. In fact, in November last year, the Macron government promised to raise the minimum wage by 100 euros per month at the demand of yellow vest protesters triggered by the increase in oil taxes. The government, which has maintained its position that raising the minimum wage could negatively affect job creation, has taken out a “minimum wage increase” card to deal with angry public sentiment.However, on the 19th of the same month, a government spokesman announced that the minimum wage increase rate applied in 2019 will be only 1.5%, and instead, the activity bonus will be expanded to meet the goal of increasing the net income of workers receiving minimum wage by 100 euros. Therefore, this year’s minimum wage rose only 22.75 euros (about 29,194 won) from 1,498.47 euros per month to 1,521.22 euros (about 1,952,136 won).
■ Australian Panel of Experts Decides on Intermediate Labor Demand
In Australia, a separate committee, the Expert Panel for Annual Wage Review, effectively determines the minimum wage. A panel of experts under the Australia Fair Work Commission will review the current status of the labor market, such as labor productivity, inflation, and labor costs, and the Australian economy, including the Australian government’s budget and central bank’s monetary policy, to deliberate and vote on the minimum wage.
The expert panel consists of a total of seven members, including the chairman, three full-time members appointed by the chairman, and three part-time members, experts in industry, labor, social policy, and economy appointed by the government. The panel of experts will form a Minimum Wages research group to conduct and order research necessary for minimum wage deliberation, and start re-evaluation of the minimum wage every March. After receiving proposals from various organizations, institutions, and companies regarding the minimum wage, the minimum wage will be decided around the end of June by referring to them. The revised minimum wage comes into effect on July 1 every year.Last year, the Australian Fair Work Commission announced that the minimum wage will be raised to 18.93 Australian dollars (about 15,282 won) per hour and 719.20 Australian dollars (about 586,110 won) per week from July 1. This is an increase of 3.5 percent compared to the previous year. Excluding the inflation rate of 1.9%, the real increase rate is 1.6%.Earlier, the Australian Industrial Group, an employer group, has demanded a 1.8% increase and the Australian Union Conference (ACTU) has demanded a 7.2%. The Commission’s choice of a median of business and labor demands resulted in neither being satisfied.Industrial Group CEO Innes Willox warned that (the increase in the minimum wage) could dampen companies’ desire to hire, and Sally McManus, secretary of the Australian Union Council, pointed out, “We have taken a step toward living wages, but this is not living wages.”
■ Japan’s Minimum Wage Commission’s ‘central-local’ dualization
In Japan, a separate committee decides the minimum wage by region and industry. If the Central Minimum Wage Council divides 47 prefectures into four grades (A, B, C, and D) and presents the target, the local minimum wage council will thoroughly review the wage status in the region and review and decide on various statistics. After that, the final decision will be made by the prefectural labor bureau through procedures related to the objection. Most workers are subject to the minimum wage for this region.The Central Minimum Wage Council consists of a total of 18 members, six each from labor, management, and public interest committees. Workers’ members and user members shall be appointed by the Minister of Health, Labour and Welfare by candidates recommended by relevant labor unions or user organizations. The local minimum wage council consists of a total of 15 members, 5 each from labor, management, and public interest committees (a total of 18 from Tokyo and Osaka, 6 each). The labor and management representative members shall be appointed by the director of the local labor bureau from among the candidates recommended by the labor union and user organizations.
SAM KIM
ASIA JOURNAL
