Minimum Wage and Employment Dynamics in Korea

Friday, February 7, 2020
12:00 PM - 1:15 PM
(Pacific)
Philippines Conference Room
Encina Hall, Third Floor, Central, C330
616 Jane Stanford Way, Stanford, CA 94305
Speaker: 
  • Jungmin Lee

Moon Jae-in administration increased South Korea’s minimum wage by nearly 30 percent in 2018 and 2019 under its political slogan of "income-led growth." The idea was that the higher minimum wage would boost low-wage earners’ earnings, thus the income inequality would be reduced while promoting economic growth with increased labor income and expenditure of low-wage workers and their households. This idea was, however, heavily criticized by those who argued that the minimum wage could not be a tool for economic growth and there could be a negative effect on employment.

Lee will discuss empirical findings from his research on the Korean minimum wage including the effect of the recent wage hikes. Using employer-employee matched data and longitudinal data on the universe of establishments, he estimated the effect of the minimum wage on net job growth and tried to decompose the effect into job creation and destruction by existing establishments as well as by establishment entry and exit. He found a significant negative effect of the minimum wage on employment growth; and also that ignoring the minimum wage’s effect on the self-employed could underestimate the adverse effect on total employment. To explain the mechanism, he focuses on the Korean labor market's unique feature—a high share of the self-employed in the workforce and their financial marginality. His findings demonstrate that the minimum wage’s effect and its channels should differ across countries depending on labor market institutions and structure.

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Jungmin Lee
Jungmin Lee is a professor of economics at Seoul National University in Korea, and also a Research Fellow at the Institute for the Study of Labor in Germany and at the Center for Research & Analysis of Migration at University College London in UK. Previously, he was an assistant professor at University of Arkansas and Florida International University, and an associate professor at Sogang University in Korea. His current research focuses on Korean labor market and education policies, interactions between health and labor market outcomes, and North Korean refugees. He has been a member of editorial board of many economics journals in Korea. He was the chief editor for the Korean Journal of Labor Economics and he is currently a Co-Editor for the Korean Economic Review; and was a member of the committee on youth employment of the Korea Tripartite Commission. He has published more than 50 papers in academic journals, mostly about the Korean economy. He received a bachelor’s degree in international economics from Seoul National University and PhD in economics from the University of Texas at Austin.