South Korea has finalized the minimum wage for 2025 at 10,030 won ($7.3) per hour, marking the first time the compulsory hourly minimum wage has surpassed 10,000 won.

The tripartite Minimum Wage Commission, which is composed of nine members each from labor, business and the public sector, opted for an increase of 170 won, or 1.7 percent, from last year’s rate of 9,860 won. It is the second-lowest increase on record, in percentage terms.

The new rate translates as 2.1 million won per month, based on a 40-hour workweek.

The hourly wage for next year, reached during the 11th plenary meeting of the commission, satisfied neither labor nor management representatives. The labor representatives said the latest increase was far lower than consumer inflation, arguing that it was a cut in real wages. The management side, in contrast, complained the psychologically important 10,000 won had been broken in a way that would put more pressure on business owners.

Early last week, the labor side had demanded 11,200 won per hour for next year’s minimum wage, a hike of 13.6 percent, while the management segment of the 27-member Minimum Wage Commission had proposed a near freeze.

On Friday, the management side and a majority of the public interest members voted in favor of the 10,030-won minimum wage in a vote after some labor representatives of the commission walked out, protesting that the hike was too low.

The commission also voted down a proposal to adopt the differentiated application of minimum wages for certain sectors such as restaurants, cafes and accommodation businesses, where the minimum wage is said to be burdensome, according to the management side.

As with past years, a fierce confrontation between labor and management has played out since the commission began to review proposals on May 21. The rocky process, characterized by loud disputes and wide gaps in proposals, has long been repeated each year.

Experts say the dispute-laden negotiation process of the commission should be overhauled to reach a consensus that can meet the demands from all sides more smoothly, reflect the potential impact of the increase on the broader economy and explore more flexible options such as the differentiated application of the minimum wage.

However, the outlook for a smooth and cooperative process remains cloudy. After all, the stakes are too high for each side to compromise easily, resulting in conflicting views about how the increase in minimum wage will affect a wide range of businesses and individual workers.

The country’s minimum wage has almost doubled since 2014, when the rate was 5,210 won per hour. Business owners who have to shoulder more costs for workers claim that the hourly wage has been going up too fast. Workers, including part-timers, however, argue that the wage does not reflect the surging inflation in recent years.

The yardstick often used for a fair minimum wage is whether its level surpasses 60 percent of the country’s median wage. Korea’s minimum wage was 65.8 percent last year, higher than the average of 52.9 percent in the G7, a group of advanced countries.

Korea’s rate is now the highest in Asia. For instance, Japan, known for a relatively high minimum wage, pays 1,113 yen (9,695 won) per hour.

The management side claims the minimum wage should be applied more flexibly given that small business owners in certain sectors are struggling to pay the state-set hourly wage. The labor side argues that the annual hike should reflect at least the inflation rate to maintain domestic demand.

Given that both labor and management sides generally agree that the wage-setting process should be improved, the government is required to reconfigure the way the commission works to ensure fairness and restore public trust.