SEOUL • South Korean President Moon Jae-in said yesterday that the government may take steps to cushion the effects from the sharp minimum wage increases - a combined 29 per cent over two years - which have led to a drop in low-paying jobs.
At a meeting of economy-related ministers, Mr Moon also said the government should aggressively remove hurdles to corporate investment, as weak domestic investment added downward pressure on an economy already grappling with slowing exports.
Mr Moon's directive came as Asia's fourth-largest economy cut its 2018-2019 economic growth outlook yesterday to the lowest in six years. Annual growth is expected to be between 2.6 and 2.7 per cent, down from 2.9 per cent this year, and 2.8 per cent for 2019 as projected in July.
"It is important that new economic policies such as the minimum-wage hike and work-week cut are pursued under a general consensus based on the tolerance and harmony of interested parties," Mr Moon said during an extended meeting of economy-related ministers, Yonhap News Agency reported.
"If necessary, we need to devise ways to make adjustments."
The meeting was the first of its kind under Mr Moon's presidency, Yonhap said.
Raising the minimum hourly rate is one of Mr Moon's core economic initiatives to re-shape the economy and deliver what he says is "quality" growth that is shared more broadly and not based on speculation.
The government has decided on a 10.9 per cent raise to 8,350 won (S$10.15) per hour for next year and has been pushing to increase the threshold to 10,000 won by 2020.
But there have been growing calls for a revision to the record hike in the minimum wage as it has hurt small businesses and is being blamed for the weakest job market in nine years. Mr Moon's approval ratings have fallen to the lowest since his inauguration in May last year.
The President, however, called for patience and faith yesterday.
"We are changing the basis of our economic policy and while there may be disputes and questions, we need to wait with patience until it bears fruit," he said.
This year's growth would be the slowest since the 2.3 per cent posted in 2012, and next year's projection appeared to be more optimistic than forecasts by global investment banks of as low as 2.3 per cent.
Analysts said the government's more ambitious gross domestic product target indicated it would pay greater attention to economic growth.
"The ministry's growth projection is more a goal than a forecast, and I think the government wants to show it cares about growth more by setting an ambitious growth target," said Mr Park Sang-hyun, an economist at Leading Investment & Securities.