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Cleaning out my inbox at the end of a busy summer, I came across the news reports from earlier this month that the monthly minimum wage was being raised 5% at the Kaesong Industrial Complex to $63.81. It got me to thinking about the economic logic (if any) underlying the increase, and how much (if any) would trickle down to the workers, insofar as standard operating procedure is for the South Korean firms to pay US dollars to the North Korean government which takes a cut and disburses to the workers the residual in North Korean won.
Steph Haggard and I have conducted a survey of South Korean firms operating in North Korea, parallel to the survey of Chinese enterprises working there which we have begun to discuss. Thirty of the firms we interviewed operated at the KIC. Of those, the vast majority of the respondents either believed that the North Korean government was siphoning off “a large amount” of the wage bill, or professed ignorance; only a single firm disagreed with this assessment. When asked if they knew exactly how much of their wages their workers were receiving, a majority plead ignorance, with less than one-quarter of the firms indicating that they knew how much money their workers were getting.
My guess is that the odds on that 5% trickling down to the workers are pretty long.
