SEOUL, July 12 (Yonhap) -- South Korea decided Friday to raise the minimum wage by 2.9 percent to 8,590 won (US$7.32) per hour for next year, slowing the pace of hikes of the hourly pay amid an economic slowdown.
The Minimum Wage Commission, involving labor and business representatives and experts, made the decision after holding intense negotiations.
The growth rate of the 2020 minimum wage slowed from a 10.9 percent rise for this year when the wage was set at 8,350 won per hour. For last year, it rose 16.4 percent on-year to 7,530 won per hour, the steepest rise in 17 years.
A single-digit increase was widely anticipated as President Moon Jae-in has signaled at flexibility amid backlashes from smaller firms and merchants over steep hikes.
The minimum wage is the lowest possible pay a local worker is lawfully entitled to receive.
Initially, the labor sector proposed 10,000 won for next year, which represents a 19.8 percent increase from this year's minimum wage.
But the business circle proposed a 4.2 percent cut to 8,000 won, inviting an angry reaction from labor.
It was the first time that the business circle demanded a cut in the minimum wage since 2009, when it proposed a 5.8 percent decrease to cope with the global financial crisis.
Later, both sides negotiated over a revised proposal of 9,570 won by labor representatives and 8,185 won by the business sector, respectively.
In his election pledge, President Moon vowed to raise the minimum wage to 10,000 won by 2020. But he has signaled at the need to slow its growth pace amid an economic slowdown and tepid job growth.
The minimum wage hike is intended to increase income and consumption, and prop up the economic growth under Moon's signature income-driven growth policy.
But it has invited strong backlash from smaller firms and mom-and-pop stores over mounting labor costs.