The Political Economy of Minimum Wage Policies in South Korea and Taiwan: Decision-Making under Strong versus Weak Partisanship

Abstract

This study conducts a systemic comparison of minimum wage decision-making in Korea and Taiwan. It demonstrates that Korea’s big-business-dominated economy builds confrontational labour–business relations to be exploited by political parties, resulting in partisan decisions on the minimum wage, to a greater extent than Taiwan’s more mixed economy. A large social divide based on the economic structure translates into a substantial partisan difference in minimum wage policies, when endorsed by the unique features of the minimum wage issue and carried out through the agents of the tripartite commission. As seen from the outcomes, a marked difference exists between Korea and Taiwan: Korea shows a dramatic fluctuation in annual minimum-wage increases, whereas Taiwan’s increases remain stable across different governments. Korean governments actively respond to their core constituencies, whether labour or business, while Taiwan governments seek to strike a balance.

Key Words:

• Economic structure
• Korea
• minimum wage
• partisan divide
• Taiwan
• tripartite commission

Acknowledgements

An earlier version of this article was presented at the International Studies Association Annual Conference 2019. The authors appreciate the panel discussant Dr Margret Hermann’s valuable comments. We also express our gratitude to Academia Sinica in Taiwan for the opportunity to present our ideas and for productive feedbacks. The comments from anonymous reviewers of the Journal of Contemporary Asia were highly constructive, and the journal editor Dr Kevin Hewison provided extensive editorial review that was essential in finalising the article. Finally, we thank our colleague Dr Mi Kyeng Jeong for her kind checkup of the Korean data to refine our analysis.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1 Instead of “liberal,” the term “progressive” is used to define those political parties in Korea sympathetic to high minimum wages and because a few conservative parties took “liberal” in their party names, thus creating confusion. Past authoritarian regimes and post-democratisation parties inheriting old economic policies are classified as conservative groups, whereas the others as either liberal or progressive (see, for example, Choi 2012; Lee 2012).

2 Partisan influence on minimum wages is included, if not discussed directly, in the literature on how party ideology affects economic policies such as monetary policy, fiscal policy, tax rates, and economic liberalisation (Potrafke 2017, 136–149).

3 To take a few examples, Lee (2007), Hong (2018), and Kim (2019) have commonly investigated the effects of minimum wages on employment in Korea, all published by the Korea Labour Institute. Similarly, Park (2018) and S. Cho (2018) analysed Korea’s minimum wage decision-making system from a legal/organisational point of view, published in journals issued by the Korean Association of Labour Laws.

4 Raising the minimum wage may also lead to a higher public sector wage bill (ILO 2016, 98–100). However, the percentage of public sector employees earning the minimum wage is very tiny in the two countries. It is worth noting that for other labour policies, such as labour insurance in Taiwan, the government is responsible for 10–40% of the premium, depending on the types of labour.

5 The Tripartite Commissions in Korea and Taiwan estimated that about 1.2 million out of 11.52 million workers in Taiwan in 2020 earned minimum wages, and 3.5 million out of 20 million in Korea in 2002.

6 For example, the KMT enacted the Labour Standards Act in 1984 and the national health insurance programme in 1995. The DPP has also switched its position from a welfare-first policy to a balanced-economy one (Shim 2020, 27–28). Later, it also launched banking reforms in the early 2000s to break down one of the KMT’s support bases (Lauridsen 2014, 440–442).

7 For clarification, the rates in Table 2 are only nominal without considering other relevant economic factors like inflation or GDP growth. So, there must be different rates depending on the factors considered. Still, the figures in the table are widely accepted as the data for analysis and should be meaningful as political initiatives. See, for example, Lim (2021, 145: Table 3) for a different calculation of the increase rates by subtracting the inflation and growth rate from the government announced rates across the administrations.

Additional information

Funding

The authors were able to build the framework for this article in 2018 due to generous financial support from the Taiwan government’s MOFA Taiwan Fellowship.