Small business owners challenged by rising labor cost

(Yonhap)

Small business owners in South Korea are struggling under the burden of rising labor cost, with the minimum wage rising every year to hit 10,000 won ($7.11) per hour starting in 2025.

A chicken restaurant owner in Mapo District, western Seoul, has been working seven days a week since October 2024. For the past 10 years since opening his business, he had always taken Mondays off, leaving the store to his staff, but with the recent downturn and rising labor costs, he had no other option but to work himself and has been working more than 12 hours a day over the past month.

According to data from the Korea Federation of Micro Enterprise (KFME) and Statistics Korea on Thursday, the number of self-employed individuals without employees was 4.27 million in 2023, up from 4.13 million in 2014.

The prevalence of “split hiring,” which is aimed at avoiding payment of weekly holiday allowances, also highlights the heavy burden of labor costs for small business owners.

“I’ve been trying to find staff who work less than 15 hours per week because the weekly holiday allowance is burdensome, but it is hard to find workers willing to work only during peak times,“ a restaurant owner in Seodaemun District, northwestern Seoul, said.

Small and medium-sized enterprises (SMEs) are also facing difficulties due to the increased minimum wage.

“The minimum wage has risen sharply in recent years, putting significant pressure on company management amid the current economic downturn,” according to an individual who runs a plating company in Cheongju, North Chungcheong Province. “We need to cut fixed costs such as labor, but there are limits for small businesses.”

Among SMEs, relatively larger and more capable companies are establishing automated facilities, but this is proving more difficult for smaller firms.

“Setting aside the costs, we still do not have an answer on how to automate processes that have relied on skilled workers for so long,” he added.