By Shin Hyon-hee

The two Koreas have agreed to raise the minimum wage by 5 percent for North Korean workers at their joint factory park, the Unification Ministry said Tuesday, following months of grueling negotiations amid strained cross-border ties.

The sides held talks at the Gaeseong industrial complex at the North Korean border city on Monday. Under the deal, the monthly pay, which includes insurance fees and other benefits, will increase to $73.87 from $70.35 and apply retroactively from March.

An inter-Korean committee tasked with the operation of the business district will continue to discuss ways to improve the fundamental wage structure, a ministry official said.

“The two sides also agreed to have businesses adjust incentives according to the employees’ participation, contribution to production and attitude at work, while ensuring stable labor supplies,” the official told reporters on condition of anonymity.

“We resolved the most pressing issues at hand but still have a long way to go. We will work through dialogue to come up with a reasonable wage system in a way that helps enhance productivity.”

The row broke out in February as the North declared a 5.18 percent wage hike as part of a sweeping regulation amendment, unilaterally rescinding the existing 5 percent annual ceiling that has ruled for years.

The negotiations kicked off in July with the joint panel and Pyongyang’s General Bureau of the Special Zone Development Guidance but had made little progress in the face of the North’s unwavering demands.

With other compensation taken into account, the total salaries for the some 55,000 workers will likely rise more than 5 percent, according to an official at an association of the 124 South Korean firms operating factories in Gaeseong.

Nestling just north of the heavily fortified border, the complex was launched in 2004 and has since been the last remaining symbol of inter-Korean rapprochement.

In 2013, the complex saw an unprecedented four-month freeze after Pyongyang suddenly barred South Koreans’ entry to the district and withdrew its workers in apparent protest against U.N. sanctions and Seoul-Washington military exercises.

(heeshin@heraldcorp.com)