| Impacts of Minimum Wage Increment on the Agricultural Sector: Implications and Challenges | |||
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| Author | Rhew, Chanhee | ||
| Views | 69750 | Publication Date | 2018.11.30 |
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Background The minimum wage in 2018 was set at 7,530 won per hour, which was 16.4% higher than the previous year. The agricultural sector is also not free from the aftermath of the minimum wage increment. Nevertheless, previous studies on the impact of the minimum wage on the agricultural sector are very limited. Most of the previous researches have limited debate using statistical data or survey results and have not tried to analyze in depth in the structure of supply and demand of the agricultural labor force. In this study, the effects of the minimum wage increase on the agricultural sector were analyzed focusing on the production stage, considering the specificity of the agricultural sector and the structure of the employment market. This is because the structure and characteristics of the agricultural sector, especially the wage level formed in the agricultural labor force demand-supply mechanism, can be more accurately analyzed to determine the impact of the minimum wage increase. The purpose of this study is to analyze the structure and actual situation of the agricultural labor force and to analyze the effect of minimum wage increase on the agricultural production sector in this structure and to draw policy proposals. Methodology In this study, three methods are employed. First, a quantitative analysis using “Farm Household Economy Survey”, “Survey on Production Cost of Agricultural Products”, “Survey on Production Cost of Livestock Products” is conducted. Second, to grasp producers' perception of anticipated effects of raising minimum wage, a survey using structured questionnaires on 804 farm households is carried out during the period from May 28 to June 20, 2018. Lastly, the authors visited greenhouse, livestock and horticulture farmers to conduct in-depth interview. Key Findings We analyzed the impact of the minimum wage increase on the agricultural production sector, especially the employment labor cost, for the sample farmers in the “Farm Household Economy Survey” in 2016. Assuming that the farmers paying wages less than KRW 7,530 in 2016 are required to observe the wage level, total labor costs are estimated to increase from 1.26 trillion KRW to 1.31 trillion KRW or by 3.77%. Considering the portion of labor costs out of total operation costs in 2016, the policy change is anticipated to increase the total costs by 0.23%, on average. In short, although the minimum wage in 2018 was raised by 16.4% from the previous year, it would not significantly increase labor costs in the short term. Since the majority of farmers have already paid higher wages than the minimum wage due to lack of chronic labor (excess demand), the increase in the labor cost due to the minimum wage increase is relatively small. In contrast, raising minimum wage is expected to increase reservation wage of employees as well, which is, in the mid-run, likely to be the larger burdensome for employers in agricultural sector. Also, the policy change affect not only agricultural sector bur other especially wage level for construction and restaurant sectors. In turn, stronger competition between sectors for labor force is possibly raise current wage level. Conclusion and Suggestion Mitigating potential “side effects” of the policy shocks requires not only short term operation-stabilization support but tackling deeply underlying supply-demand imbalance within the agricultural labor force market. Based on this perspective, the authors suggest as follows. First, ways to formalize “unofficial” labor force teams can be considered. Second, there is a plan to organize existing management units including farms and make it easier to secure labor force (employment). The “Gyeongbuk-type village farming and nurturing business” which has been promoted in some areas of Gyeongbuk province is a representative example. Third, facilitating labor saving technologies and/or tools (labor saving process by promoting mechanization, etc.) is to be considered. Fourth, the government should seek to revamp labor market services in a mid- to long-term manner in a way that can integrate the above-mentioned measures comprehensively. In addition to the function of linking the employment labor provider (job seeker) with the consumer (job offerer), it is necessary to establish a system that can carry out labor management or agriculture work as an agency. Researchers: Rhew Chanhee, Eom Jinyoung, Kim Yunjin Research period: 2018. 3. ∼ 2018. 6. E-mail address: chrhew@krei.re.kr |
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