Small business owners fear big minimum wage increases

Small business owners are despairing as unions demand a 25 percent increase in the minimum wage. Talks on next year's minimum wage began after Minister of Employment and Labor Lee Jung-sik referred the matter to the Minimum Wage Commission...

Members of the Korea Federation of Micro Enterprise request different hourly minimum wages based on business type citing Article 4 of Minimum Wage Act at a press conference held at Yeouido, western Seoul, on Wednesday. [NEWS1]

Small business owners are despairing as unions demand a 25 percent increase in the minimum wage.

Talks on next year's minimum wage began after Minister of Employment and Labor Lee Jung-sik referred the matter to the Minimum Wage Commission on March 31. Representatives from the Korean Confederation of Trade Unions and the Federation of Korean Trade Unions held a press conference in central Seoul on April 5 demanding a big wage increase, citing high inflation, reduced real incomes and the comparatively low wage jump in Korea compared to increases in other large economies.

Labor unions want the minimum hourly wage increased to 12,000 won ($9.15) next year, up 24.7 percent from the current 9,620 won. The Korea Federation of Micro Enterprise (KFME) wants wages unchanged next year.

“If hourly wages rise to 12,000 won, including holiday pay, owners will have to pay their employees an hourly wage of 14,400 won, which totals approximately 2.5 million won per month,” a KFME spokesperson said. “Considering that average monthly income of small business owners is 2.35 million won, according to 2021 data, employees would be actually receiving more income than owners.”

The association also requested that the minimum wage vary based on type of business, citing Article 4 of Minimum Wage Act, which states “the minimum wage may be determined by type of business.”

Business owners protest that they are driven to the edge due to rising costs in human resources to the point that they are running their businesses alone. According to data, the number of one-person businesses jumped 7 percent to 4.27 million last year from 2018’s 3.99 million.

“The minimum hourly wage skyrocketed 48.7 percent to 9,620 won this year from 2017’s 6,470 won, whereas operating profit of small business owners plummeted 43.1 percent after the Covid-19 pandemic, and their outstanding loans exceed 1,000 trillion won,” said KFME President Oh Se-hee. "Owners are driven to the edge now.”

Cries of protest are rising among business owners.

“I believe my monthly income will shrink to under 1 million won,” said a 56-year-old convenience store owner who runs his store in Euijeongbu in Gyeonggi, after he calculated his income if hourly minimum wage rises. “Even now, part-timers who work nightshift receive more than 2 million won of monthly income. If the minimum wage does rise again, I think it’s better to work as a part-timer.”

Kim Myung-sook, a 62-year-old restaurant owner in Ansan, Gyeonggi, faces a similar situation. She currently pays between 2.6 million and 2.7 million won monthly per person to five workers. If the minimum wage rises, monthly wages per person will rise to between 3 million and 3.2 million won.

“I think I will have to hire only part-timers to work during our busiest time,” she said.

Jeong Dong-gwan, who has been running a samgyeopsal (pork belly) restaurant for 22 years, has noticed more restaurant owners running their businesses alone due to minimum wage increases.

“I only hold the title of owner,” he said. “In reality, employees earn more than me.”

Owners who run small companies are on full alert.

“Our business circumstances do not allow us to blindly follow the wage hike,” said 70-year-old Kim Chang-woong, who runs a factory with 20 employees. “If wages do rise, we have no choice but to reduce the number of workers.”

Owners also point out that the minimum wage level has risen to the point that it’s difficult to apply them in reality — even more so than other countries.

Korea’s rate of the minimum wage increase from 2018 to 2022 was 41.6 percent, according to data from the Korea Enterprises Federation. In Canada, they rose 32.1 percent; Britain 26 percent; Germany 19 percent; Japan 13.1 percent and France 7.4 percent.

“It’s true that the issue is complex due to the pressure of inflation felt by small-and-middle-sized enterprises and costs of human resources for small business owners,” said Seo Yong-goo, a professor at the school of business at Sookmyung Women’s University. “We need to thoroughly review the reasons behind the rise in wages.”

BY BAEK IL-HYUN, YOO JI-YOEN [lee.jaelim@joongang.co.kr]