This blog post calmly examines the interests of economic actors through the conflicts over working hours, wages, and taxes that persist even after employment.

Getting hired isn’t the end of the story

Let’s say you somehow managed to land a job. Does that mean all your problems are solved? After getting hired, other issues await: namely, the problems of ‘labor intensity’ and ‘wages’. Opinions on these matters are sharply divided among three stakeholders with differing interests. Among them, households and businesses stand on opposite sides. From the worker’s perspective, the less time worked for the higher the compensation, the better. Conversely, companies want to have workers labor as long as possible while paying as little as possible. Given these divergent interests, conflict between these two parties over labor issues is perhaps inevitable.
Suppose employment has been secured and wages have been somewhat negotiated. Then the issue of ‘taxes’ arises. Interestingly, households and businesses, who were at odds over employment and wages, now find themselves on the same side in this phase. This relationship is closer to a strategic alliance that may split again depending on the situation, but when taxes become the issue, they generally speak with one voice. The argument is that the government shouldn’t collect excessive taxes. For this reason, articles addressing tax issues often portray the government as the ‘bad guys’ and businesses and households as the ‘poor victims’.

The Payer and the Paid

“Civil Servant Salaries: ‘Not Even Minimum Wage’ vs. ‘Queueing for Exams’” (SBS, 2022.09.02.)

This article addresses a particularly contentious issue within labor-related debates. The minimum wage refers to the lowest level of pay guaranteed by the state to ensure workers can maintain a stable livelihood and improve the quality of their labor. Given the years of heated debate surrounding this system across both business and political circles, readers have likely encountered it before.
In this issue, the positions of businesses and households remain largely unchanged. Businesses argue, “We cannot pay more than what the work is worth,” while workers counter, “We cannot accept less than what the work is worth.” Determining which side is right, or what level is appropriate, is never easy. This makes it crucial to clearly establish your own perspective on the issue. Only then can you make subsequent judgments and choices, and ultimately chart your next course.
After determining your position, it’s necessary to consider together which direction the South Korean economy will flow. Will raising the minimum wage truly make the South Korean economy struggle? If your thoughts lean towards that possibility, you should judge the future economic outlook negatively and adjust your investment strategy accordingly. Conversely, what if you conclude that, contrary to corporate claims, a minimum wage hike won’t significantly impact business operations? In this case, rather than a sharp economic contraction, you might consider the possibility that more households with a minimum safety net could increase consumption, potentially leading to economic recovery. Accordingly, your investment strategy would inevitably change.

Should we work more? Or less?

Is working more preferable, or is working less preferable? The answer to this question likely already resides in each person’s heart. Workers would want to work as little as possible while maintaining at least their current wage level. Conversely, employers would want to increase sales by having workers labor longer, even if labor costs rise somewhat. Thus, from the outset, the positions of both sides run parallel.
Therefore, what we must consider regarding this issue is not simply which side is right. We must collectively consider which argument is more persuasive, which aligns better with the current socio-economic reality, and which direction corresponds to the societal vision we should pursue.

“Chu Kyung-ho: ‘52-hour workweek lowers quality of life’… Urges extension of 8-hour overtime sunset clause” (MBN, 2022.12.20.)

The ‘Choo Kyung-ho’ appearing in the headline was the Deputy Prime Minister for Economic Affairs and Minister of Economy and Finance of the Republic of Korea at that time, meaning he was the person responsible for overseeing the nation’s finances. The article mentions the ‘52-hour workweek system’. This system, introduced in 2018, limits workers to a maximum of 52 hours per week. However, to mitigate confusion caused by the system’s abrupt implementation, a temporary grace period was established. Until the end of 2022, workplaces with fewer than 30 employees were permitted to allow an additional 8 hours of work per week. The ‘sunset extension’ mentioned in the article refers to the argument for extending this grace period. In other words, the core of the government’s argument is ‘let workers work beyond the 52-hour limit.’
Such discussions later continued in various forms, including the ‘69-hour workweek system’ debate. While the details differ, the underlying direction of making working hours more flexible to allow longer work periods is similar. The government’s logic is that shifting the management unit for extended working hours from weekly to monthly or quarterly allows for concentrated work during busy periods and reduced hours during slower times. This, they argue, reduces the burden on companies while also ensuring workers’ quality of life.
To understand why the government makes such claims, it is necessary to calmly examine the basis for them. The core of the government’s argument is that the 52-hour workweek system actually lowers quality of life. At first glance, this seems counterintuitive: working hours decrease, yet quality of life declines. However, it is necessary to delve one step deeper. When working hours decrease, wages also decrease, resulting in a reduction in real income. To compensate for this reduced income, workers may take on additional jobs, ultimately increasing their total working hours and potentially lowering their quality of life. Furthermore, it is argued that small and medium-sized enterprises (SMEs) face the burden of suddenly needing to hire additional staff. To meet deadlines, they may push workers to work excessively, exposing themselves to the risk of violating the Labor Standards Act.
When encountering such arguments, one must first consider each perspective and also evaluate the broader economic impact of the policy.

Taxes: Should we collect more? Or less?

Increasing taxes is called a ‘tax hike,’ while reducing taxes is termed a ‘tax cut.’ Regardless of era, region, or social standing, people generally dislike tax hikes and prefer tax cuts. When reading tax-related articles, one must fully bear this fundamental sentiment in mind. At the same time, one should not become overly fixated solely on whether taxes are collected in large or small amounts. What matters is whether they are collected ‘properly’ and spent ‘properly’. Even if taxes are collected in small amounts, if they are spent in the wrong places, that is wasteful; conversely, even if taxes are collected in large amounts, if they are spent appropriately, that can be justified. The problem is that the standard for this ‘properly’ differs from person to person, and it is precisely at this point that constant debate arises.

“‘National competitiveness or tax cuts for the wealthy?’… Corporate tax cut debate stalls budget bill” (News1, December 12, 2022)

Before examining this article in detail, we first need to understand the concept of ‘framing’. Framing refers to the way we define and view an issue through the ‘framework’ of specific words or situations. Framing has the advantage of simplifying complex issues for easier understanding. However, it also carries the disadvantage that once a frame diverging from reality takes hold, it becomes difficult to correct.
The various policies pursued by the South Korean government in the latter half of 2022 can be summarized by the goal of “boosting the economy by any means necessary.” One policy attempted to achieve this was ‘corporate tax cuts’. Most companies, represented by joint-stock corporations, take the form of ‘corporations’. Just as workers pay income tax, corporations pay corporate tax when they generate profits. Therefore, cutting corporate tax means increasing corporate net profits. However, as corporate profits increase, revenues inevitably decrease elsewhere. The most direct impact is a reduction in government fiscal revenue.
This article covers the situation where the ruling and opposition parties clash over the government’s budget proposal for the following year. What’s crucial here isn’t just the clash itself, but the way that clash is framed. Budgets and taxes involve large sums and complex structures, making their effects difficult to grasp intuitively. Consequently, each side emphasizes its arguments by putting forward words or phrases that represent their stance. In other words, they utilize framing.
The core frame of the government’s argument, centered around the ruling party, is ‘national competitiveness’. The logic is that lowering the tax burden on corporations strengthens competitiveness, leading to growth in the entire South Korean economy and ultimately benefiting all citizens. They also argue that support is needed to enable our companies to leap forward amid global economic uncertainty.
Conversely, the core frame of the opposition’s argument is ‘tax cuts for the wealthy’. They contend that reducing taxes for large corporations, which already generate sufficient profits, does not spread the benefits to the entire population. Key counterarguments include that South Korea’s effective tax rate is by no means excessive by international standards, and that simply lowering tax rates does not significantly increase corporate relocation overseas or foreign investment domestically.
Thus, both sides are locked in a tense standoff, each advancing different logics: ‘expanding community benefits through national competitiveness’ versus ‘benefits only for the privileged few.’ While readers can easily grasp the overall outline of the issue through these frames, separate scrutiny is needed to assess how accurately these frames reflect actual reality. Therefore, a more detailed examination of the specifics is necessary.

What the Government Does with Taxes

“U.S. Congress Reaches ‘Bipartisan’ Agreement on Federal Budget… Includes Semiconductor Strengthening” (Asia Economy, 2022.12.21.)

The ultimate role of government is largely similar across nations. It is common that taxes are used for national interests and the people. However, the direction of policy differs depending on which areas receive more resources. Accordingly, government fiscal management can be categorized into ‘economic stimulus policies’ and ‘economic stabilization policies’. Given the sheer scale of government spending, the impact on the real economy also varies significantly depending on which approach is prioritized.
To examine this point, it is necessary to look at the budget management practices of the U.S. government, one of the nations exerting the greatest influence on the global economy.
The government’s financial plan is presented as a ‘budget proposal’. In countries with a system of separation of powers, the legislature reviews it and grants final approval through a ‘voting’ process. This can be likened to a situation where one spouse says, “I want to buy a house next year,” and the other responds, “Fine, but let’s tighten our belts together.”
Like South Korea, the U.S. also experiences a negotiation process that is not always smooth. There is repeated pushing and pulling until the legally mandated deadline, and if no agreement is reached, a ‘shutdown’ occurs where federal government operations cease.
The total U.S. federal budget finalized ahead of 2023 was a massive $1.7 trillion. Approximately half of this, $850 billion, was allocated to defense spending, encompassing various items like military aid to Ukraine and disaster relief. It also included funding to strengthen domestic semiconductor manufacturing capabilities and measures restricting government agencies from using specific foreign platforms.
This budget proposal suggests the U.S. government’s policy priorities during this period: ‘military strength enhancement,’ ‘Ukraine support,‘ ‘protection of economically vulnerable groups,’ ‘domestic job creation,‘ and ‘containment of China.’ In this way, the government concretizes its policy direction by allocating more or less tax revenue to specific sectors. Areas receiving concentrated tax funding become revitalized, while those seeing reduced funding shrink. For those working in these sectors, this is a matter directly tied to their livelihoods.
This is another reason why we must clearly recognize our own position when reading economic articles. Depending on where the government’s tax revenue is concentrated, some people may directly experience benefits or harm, while others may stand at a distance, observing as evaluators and saying, “This part was well done, but that part is disappointing.” Ultimately, reading economic articles is also a process of examining one’s own position and perspective in viewing the world.