Comparing Minimum Wage Setting Mechanisms in Japan and Korea: Searching for the Sources of Difference

The paper examines developments on minimum wage setting mechanisms (MWSM) in Japan and Korea in recent years, focusing on institutions, processes and outcomes of MWSM. Such attributes of the institution are examined as the basic minimum wage setting structures, the constitutions and deliberation procedures of the consultative bodies, and the factors considered in deciding annual minimum wage deliberation. Some similarities are found. Both countries heavily rely on tripartite committees at the national level. Besides, both governments try to influence minimum wage setting procedures by indicating higher minimum wage is desirable. Contrarily, some differences are discovered. One difference is shown in the process of MWSM: it is much tougher in Korea than Japan. Another difference is observed in the outcome of MWSM: the minimum wages have increased much faster and higher in Korea than in Japan. From a system perspective, the differences may be related to what factors minimum wage setting organizations consider. While income distribution is one of the important factors to be considered in Korea, it is not the case in Japan. It seems that the Korean MWSM is assigned a wider role to reduce income gap among workers, while the Japanese counterpart is allowed to focus more on specifically low wage group of workers. The authors remind people of policy circles of the importance of wider perspective in examining performance of minimum wage policy. A minimum wage policy may produce expected results under certain circumstances and may not under other conditions. In order to reach a conclusion, one needs to consider wide range of related policies besides economic/social factors.