Changes in the Minimum Wage Policy for the Age of Automation: A Historical Institutionalist Case Study in South Korea

While Korea adopted Japan’s approach to the minimum wage in 1988, it developed its own policy very distinctly from Japan’s. This study explores how and why Korea’s minimum wage policy has evolved as it has done so over the past 35 years. Moreover, it seeks to establish the causal relationship between technological progress and changes in Korea’s minimum wage policy. Given the centrality of technological development in Korea’s policy to date, technological progress has surely influenced changes in social policy.
This study focuses on three significant moments of social policy reform. In 1988, minimum wage policy was applied by each industry in such a way that it changed to a single national minimum wage. In 2000, the coverage expanded, becoming a universal policy. This has precipitated an improvement in the ratio of the minimum to median wage since 2003, rising from 0.33 in 1988 to 0.63 in 2019. As a result, Korea’s minimum wage level is the second highest among Organisation for Economic Co-operation and Development high-income countries.
This study demonstrates that there is a causal relationship between technological advances and changes in minimum wage policy. As technological development has caused the income gap in Korea to increase, policy-makers are recognised this trend and developed minimum wage policies to address income inequality.
Korean policy-makers have understood that economic issues, such as economic growth and global economic crises, produce income inequality. The government has, however, only slowly come to recognise that technological progress creates an income gap and that minimum wage policy must change in order to reduce this income disparity. In the late 1980s, it was the private sector that began to realise this correlation, but the awareness only spread to government officials by the late 1990s; by the 2010s, however, all policy-makers took this as a given.