NK’s Unilateral KIC Wage Hike: ‘Small Gain, Big Loss’

North Korea recently made the unilateral
decision to raise the minimum wage of Kaesong Industrial Complex [KIC] workers
by 5.18% from 70.35 USD to 74.00 USD.

The raise was announced by the presidium of
the Supreme People
s Assembly, and is a follow-up to
the amendments of the KIC labor regulations. The North breached the principle
of increasing the wage by only 5% per year previously agreed upon
with the South, and said it would eliminate the restrictions on the width of
wage increase. It declared that North Korea would unilaterally decide upon the
wage in the future to come as well.

Officials from South Koreas Ministry of Unification stated, North
Korea informed us on the 24th through Kaesong Industrial Complex
Management Committee that it will put into effect the unilateral amendments of
the Kaesong Industrial District labor regulations, which were made last
December.

The North Korean government also declared
15% of workers’ wages, including their bonuses, would go to social insurance–a
fee that firms pay to the North. Until now, bonuses were not included when
calculating this cost. 

If the wage is set as the recent
amendments, South Koreans will start paying 9 USD more to each North Korean
laborer a month, an increase from 155.50 USD to 164.10 USD.

The South Korean government released a
written notice under the name of the co-chairman of Kaesong Industrial Complex
that the South cannot accept any unilateral changes without consensus between
both governments. However, the North refused the mere reception of the
document.

The statement also proposed holding a sixth
conference among co-executives on the 13th of March, during which revisions of
the wage system and the operation of the complex are slated for discussion. The
conference has not been held since last June.

An official from the Ministry of
Unification stated,
We cannot accept any raise in wage
not officially agreed upon between the two Korean governments.
He added, We once more ask of the North to
work on normalized advancement of the complex through consensus between the two
countries.
 

Cho Bong Hyun, a senior researcher at IBK
Economic Research Institute, told Daily NK, “This move from the North
is to show the South that it will carry out operations in the complex according to its revision
in rules–as it chooses.” He added, “You cannot exclude the possibility that it will
demand even higher wage hikes next year.”

The North is currently flouting the accord
between two Koreas for its immediate profits, but this will actually be a loss
for them in the long-term. The Kaesong Industrial Complex is seen as a
benchmark of foreign capital investment, so it will have to show the
willingness to compromise and negotiate with South Korea, not seeking immediate
procurement of USD,” he said.