The Impact of Minimum Wage Hike on Employment in South Korea Examined Through Multiple Industrial Variations

Abstract

This paper examines the impact of minimum wage hike on employment in South Korea, focusing on whether the government’s decision to largely increase the minimum wage negatively affected the employment rate. In studying the relationship, the paper uses a difference-in-differences that was utilized by David Card and Alan Krueger (1994). The paper further utilizes multiple industrial variations to assign a treatment group and control group. As no consensus exists about the impact of minimum wage hike on employment rates, this paper contributes to the existing literature by adding new empirical results in the context of South Korea’s minimum wage policy implementation. Through the difference-indifferences method using multiple industrial variations, we find that the large minimum wage hike did not reduce the employment rate in South Korea. The results indicate that the employment rate surprisingly increased in the industries where a larger fraction of workers was affected by the new minimum wage level, suggesting that minimum wage hike does not necessarily harm employment rates.