It looks like reality has set in for the Moon administration’s attempt to raise the minimum wage even further in South Korea:
Moon Jae-in
President Moon Jae-in admitted Monday he won’t fulfill his campaign pledge to raise the minimum wage to 10,000 won ($8.86) by 2020, after anguished protests about rising labor costs from small business owners and concerns voiced by at least one top member of his administration.
“As a result of the decision by the Minimum Wage Commission, it became difficult to achieve the target of raising the minimum wage to 10,000 won by 2020,” Moon said during a meeting with his senior secretaries at the Blue House on Monday. “I offer my apologies for being unable to keep my pledge.”
The president added that he respects the decision by the commission to keep next year’s minimum wage hike lower than expected and said the government will do its best to realize a 10,000 won minimum wage as early as possible.
Moon’s five-year term ends in May 2022. Moon expressed his appreciation to the commission for raising next year’s minimum wage by more than 10 percent. [Joong Ang Ilbo]
I think these mom and pop stores have a valid complaint because big businesses can respond to the wage increase by cutting jobs or hours and then automating where necessary. Mom and pop stores may not have the capital available to automate like a bigger business:
Owners of mom-and-pop stores on Friday called on the government to freeze the minimum wage in 2019, claiming rising labor costs will seriously impact their profitability.
If the government moves to raise the minimum hourly wage from the current 7,530 won, the Korea Federation of Micro Enterprise (KFME) won’t accept it, a KFME official said.
The Minimum Wage Commission is required to set the guidelines for next year’s minimum wage level by Saturday. Representatives for labor are demanding a 43 percent increase in the wage to 10,790 won, but small businesses have made it clear that such a step is unacceptable.
Mom-and-pop stores and other modestly sized firms account for 86 percent of the country’s enterprises and hire 36 percent of its total workforce, according to Statistics Korea.
The country’s minimum wage shot up this year, and the Moon Jae-in government is pushing to raise the hourly base to 10,000 won within three years to achieve “income-led growth.”
But local businesses are lukewarm to the idea. There has been a move to let go of workers due to rising costs, with people in their 20s and 30s facing greater difficulties landing jobs. [Yonhap]
It is going to be interesting to see how much market the new Homeplus Special warehouse store is going to be able to capture in South Korea:
Inside of Home plus Special in Mokdong, southwestern Seoul / Courtesy of Home plus
The second basement of Home plus’ Mokdong branch in southwestern Seoul looked totally different, Wednesday, as the discount store’s space selling groceries has been converted into a warehouse store with capacious shelves piled with boxes.
“As I said in March at a press conference about the business strategy of Home plus, we will unveil Home plus Special today to fulfill our promise to make a store satisfying our customers,” Home plus CEO Lim Il-soon said at a press conference, a day before the opening of Seoul’s first Home plus Special. “We opened Home plus Special stores in Daegu and Busan last month, and they have been well-received by consumers.”
Defining Mokdong as the battlefield of retailers in Korea, she predicted fierce competition with Yangpyung Costco Warehouse and Lotte Vic Market’s Yeongdeungpo branch, which are 1.6 kilometers and 2.7 kilometers from Home plus Special, respectively.
Home plus, however, is confident the new warehouse store will be a success. [Korea Times]
The patent war between the two biggest smartphone rivals has finally ended.
Samsung Electronics and Apple have settled a seven-year legal dispute over each other’s design patents. Neither disclosed the amount of the settlement.
The two giants informed the district court in San Jose, California, “they have agreed to drop and settle their remaining claims and counterclaims in this matter,” according to an order signed by Judge Lucy Koh of the Northern District of California. The settlement means all suits will be dismissed and no further case will be filed on the same claim.
“We can only say that we have settled with Apple and cannot offer any comment,” said a Samsung spokesman.
The dramatic turn of the lengthy legal battle came a month after retrial jurors in the Northern District of California handed Apple $538.6 million in damages for Samsung violating design and utility (technical) patents that included the infamous “rounded corner” patent. Samsung at the time vowed to consider its options including another appeal. [Joong Ang Ilbo]
The Cho sisters have both been officially fired by their father from Korean Air:
Emily Cho
Add Hanjin Group’s Korean Air Lines Co. to the country’s family-run conglomerates that are seeing the founding clan’s representation diluted.
This time, Hanjin Chairman Cho Yang-ho pushed out his youngest daughter after allegations she threw water in the face of an advertising agency worker during a business meeting. For good measure, he also fired his eldest daughter who four years ago spent five months in jail after the so-called nut rage incident. The executive had forced a plane to return to the gate at John F. Kennedy Airport in New York because of the way she’d been served her macadamia nuts.
Cho Yang-ho, also chairman of Korean Air, said in an email Sunday he will promote professional business managers to replace the airline’s Senior Vice President Emily Cho, his youngest daughter, and Heather Cho, president of the Kal Hotel Network. The chairman announced the changes days after South Korean police had searched Korean Air headquarters following reports of the “water rage” incident. [Bloomberg]
You can read more at the link, but I wonder how long this will last before they are brought back in some capacity into the family business?
Very rarely have I seen President Moon be criticized in the media, but it looks like he is finally facing some heat for his domestic job policies:
South Korea has been trapped in a paradox of employment.
Domestically, the more effort the government makes, the more difficult it is for young people to find decent jobs.
In other words, President Moon Jae-in’s job policies are limiting the creation of new, quality jobs in the private sector.
Last year, Moon implemented a supplementary budget of 11.2 trillion won ($10.5 billion) to create jobs and formulated another extra budget plan of 3.9 trillion won early this month. However, the job market situation has taken a turn for the worse.
The jobless rate reached 4.5 percent in March, the highest level in 17 years. The number of jobs created came to 112,000 from the same month a year ago, sharply down from January’s 334,000.
Internationally, Korea is isolated in its job market recovery.
Many big economies, including the U.S. and Japan, are showing handsome figures in employment, while Korea’s labor market has stayed in the doldrums.
The jobless rate for the U.S. stood at 4.1 percent in March, the lowest level in 17 years. Japan’s unemployment rate was at 2.5 percent in the same month, similar to 2.4 percent in February, the lowest in nearly 25 years.
The employment fiasco for Asia’s fourth-largest economy is the outcome of a toxic mixture of three forces ― Moon’s contradictory policies, market uncertainties and technology.
First, a surge in the unemployment rate is paradoxically associated with Moon’s job policies.
The Moon administration has been trying to take the initiative in job creation rather than encouraging the private sector to hire new employees.
Moon has focused on creating jobs in the public sector by hiring more civil servants and turning irregular workers into regular ones. [Korea Times]
You can read more at the link, but I never did see how adding a bunch of government jobs without a justification for them would help the economy?
This seems to be the wave of the future, cashless stores:
Starbucks Coffee Korea, the local unit of the U.S. coffee giant, said Thursday it will begin a test run of cashless stores at three outlets next month amid rising use of credit card and mobile payment systems.
The stores at the country’s major office districts — Gangnam and Guro in Seoul, and Pangyo, just south of the capital — have been tapped to start testing the new system April 23, according to the company.
When launched, it will mark the second trial for the global coffee giant, following its first cashless store under test run in Seattle, the United States, it said.
Paying with cash has been constantly declining at Starbucks stores in South Korea, from 31 percent of the total in 2010 to 15 percent in 2013 and 7 percent last year, the company said. [Korea Times]
President Trump is taking credit for GM shutting down one of their factories in Gunsan and relocating to Detroit:
U.S. President Donald Trump on Tuesday hailed General Motors Co.’s decision to shut down a plant in South Korea, saying the carmaker will now “move back” to Detroit.
GM announced the same day that it will close one of its four car assembly plants in South Korea by the end of May due to lower demand for its vehicles. The move came as part of the Detroit-based automaker’s broad restructuring program across the world.
“GM Korea company announced today that it will cease production and close its Gunsan plant in May of 2018, and they’re going to move back to Detroit,” Trump said at a trade-related meeting at the White House.
The facility in Gunsan, 270 kilometers south of Seoul, was underutilized and running at 20 percent of its capacity for the past three years.
“You don’t hear these things, except for the fact that Trump became president,” Trump said. “Believe me, you wouldn’t be hearing that. So they’re moving back from Korea to Detroit. They’re moving.” [Korea Times]
Apparently GM is saying they are closing the plant due to higher labor costs in South Korea. GM is trying to get the union to renegotiate its labor contract to keep its other three plants in the country open.
Another one of these long term anti-US issues has come back up again:
Leaders of Korea Exchange Bank’s union attempt to enter the building of the Financial Services Commission (FSC) in Seoul on Nov. 18, 2011, as the FSC holds a meeting to discuss whether to order Lone Star Funds to sell most of its stake in Korea Exchange Bank. The workers are calling for the authorities to impose a punitive measure against Lone Star’s stake sale, such as ordering the fund to sell its share on the market, in a bid to prevent the buyout fund from pocketing more than twice the money it spent on purchasing KEB stocks.
Lawyers for a Democratic Society (LDS) sent a letter to the International Center for Settlement of Investment Disputes (ICSID), Tuesday, demanding a speedy settlement of the dispute between the Korean government and the U.S. buyout fund Lone Star Funds over the sale of the Korea Exchange Bank (KEB).
“The process of the legal battle worth 5 trillion won ($4.68 billion) has been shrouded in secrecy since 2012, so we requested rapid processing under the principle of transparency,” Song Ki-ho, the chairman of the international trade committee at the LDS, told the Korea Times.
The nongovernmental organization has a special consultative status with the United Nations Economic and Social Council.
In 2012, Lone Star filed a request with the ICSID, claiming the Korean government should compensate it for the “belated” approval of its sale of its KEB stake to Hana Financial and return the taxes it paid during the delay.
The global private equity firm acquired a 51.02 percent stake in KEB from a German bank in 2003, but exited Korea in 2012 after selling the stake and gaining about 4.9 trillion won in profit. (….)
Observers said the ruling will come around March this year and note the Korean government may have to pay Lone Star hundreds of billions of won in compensation. Some point out the government may claim a part of the money from Jun Kwang-woo, a former chairman of the Financial Services Commission. [Korea Times]
You can read more at the link, but basically the crime Lone Star made was that it made too much money in Korea and then tried to take its profits outside the country. Their sale of the Korea Exchange Bank led to large protests which caused the government to try and stop the sale any way it can.
I don’t see what is so surprising about President Trump’s comment, it is no secret that he has been pushing to bring manufacturing jobs back to the United States:
While circling the sky near the inter-Korean border last week, U.S. President Donald Trump posed a question that later took the leader of South Korea’s ruling party by surprise.
According to Choo Mi-ae of the Democratic Party, Trump was on his Marine One helicopter to the heavily fortified demilitarized zone when he turned to White House chief economic director Gary Cohn and said: “I just saw something amazing. There are so many factories. Can’t they be built in the U.S.?”
The trip to the DMZ was later canceled due to fog and Trump had to turn back to Seoul to continue his two-day state visit. The trip was watched closely because Trump had threatened to use military options against North Korea and engaged in a war of words with the regime over its nuclear and missile programs.
“I think President Trump understood, while he was in the air for 30 minutes, that 25 million people were living in the area below him and that they would be wiped out in the event of war,” Choo said in a meeting with reporters in New York. “But I was so surprised when Director Cohn told me this story. Wasn’t (Trump) essentially saying we should build our auto parts factories in the U.S., too?” [Yonhap]
