South Korea’s small and medium-sized companies upped their voices calling for a freeze in the minimum wage next year, citing the heavy toll on their business from a 29.1-percent jump in hourly pay over the last two years.
Representatives of 15 organizations for small businesses, including Korea Federation of Small and Medium-sized Businesses (KBIZ), Korea Federation of Micro Enterprise and Korean Women Entrepreneurs Association, released a statement on Tuesday at the KBIZ headquarters in Yeouido, Seoul, demanding the government restrain from raising the minimum wage next year given the negative impacts and unfavorable economic conditions.
The Minimum Wage Committee – a trilateral panel of business and labor representatives and outside experts – must set the statutory base wage level for next year by June 27. The nation’s minimum wage was pushed up 29.1 percent over the last two years to reach 8,350 won ($7) under President Moon Jae-in’s campaign promise to achieve a base hourly pay of minimum 10,000 won within the first three years of his term.
When counting the extra allowances for holidays and weekends, Korea’s hourly minimum wage against average income is the highest among the developed economies of the Organization for Economic Cooperation and Development (OECD). Yet the country’s labor productivity is among the lowest, ranking at 29th.
The representatives of the business organizations added that the government should take into consideration the different financial circumstances and size of businesses across industries when deciding the minimum wage.
According to a survey done by KBIZ on 357 small businesses, 28.9 percent of the respondents said they would cut new hires if the minimum wage goes up in 2020. About 23 percent said they would downsize and 7.8 percent would consider shutting down their businesses. They also said their operating profit fell 19.4 percent on average compared to two years ago, while sales dropped 14 percent and employment 10.2 percent.
KBIZ Chairman Kim Gi-moon pleaded for union cooperation, reminding that employers have endured all of the negative effects of the wage hikes for the past two years.
[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]