[Report] "Just Enduring It"... Small Business Owners Sighing Over Minimum Wage Increase

Next Year's Minimum Wage 5.0% Higher Than This Year at 9,620 Won per Hour
Self-Employed: "Difficult to Hire Part-Time Workers Due to Increased Labor Cost Burden from Minimum Wage Hike"

A restaurant owner in downtown Seoul is updating the menu with increased prices. Photo by Mun Honam munonam@

[Asia Economy Intern Reporter Kim Gun-chan] "We are not making any profit right now. We are just holding on."

Yang Ran-mo (55), who runs a Dakhanmari (whole chicken hot pot) restaurant in Chungmuro 3-ga, Seoul, sighed as she spoke. With next year's minimum wage rising by 5.0% to 9,620 won per hour from this year, she lamented that it will become even harder to hire staff despite the shortage of workers at her store. Before the COVID-19 outbreak, she employed six staff members, but now there are only two. On weekends, she works alone without any employees.

Yang pointed out that the problem lies in the gap between the minimum wage and the actual labor costs. Wages in the labor market have already been set higher than the minimum wage. Yang explained, "For hall serving or kitchen helpers, the weekday wage is 12,000 won, and on weekends it's 15,000 won," adding, "The labor market price formation is completely unrelated to the minimum wage increase." She argued that labor costs inevitably rise due to the minimum wage hike.

With soaring prices and rising labor costs overlapping, she is considering raising menu prices. "I have been holding on, but I plan to raise prices this month," she said. "I try to lower costs by searching online, doing direct transactions, and shopping at Gyeongdong Market myself, but there is nothing I can do about rising labor costs," she lamented.

The Minimum Wage Commission held its 8th plenary meeting at the Government Sejong Complex on the 29th of last month and decided on next year's minimum wage of 9,620 won. This is 460 won (5.0%) higher than this year's minimum wage of 9,160 won. Considering the weekly holiday allowance, the hourly wage becomes 11,544 won. The monthly conversion of next year's minimum wage (based on 209 working hours per month) is 2,010,580 won. Over the past five years, the hourly minimum wage was 7,530 won (16.4% increase) in 2018, 8,350 won (10.9%) in 2019, 8,590 won (2.9%) in 2020, 8,720 won (1.5%) last year, and 9,160 won (5.1%) this year.

A store owner is calculating products at a convenience store.
[Image source=Yonhap News]

Self-employed convenience store owners also hold negative views on the minimum wage increase. Mr. A, who runs a convenience store in Jung-gu, expressed concerns about the minimum wage hike. He claimed that labor costs increase simultaneously with the annual rise in minimum wage. "If the minimum wage goes up 5% to the 9,600 won range, you have to sell about 100,000 won worth per hour just to cover labor and rent," he said. "Unless it's a family-run business, it will become difficult to hire part-time workers."

Mr. B, who operates a convenience store in Pildong, Jung-gu, shared a similar situation. He said, "In convenience stores, it's a battle between labor costs and rent. Since rent is expensive here, even using part-time workers only on weekends leaves almost no profit."

They said that due to the minimum wage increase, they have to reduce the number of part-time workers to a minimum and increase their own working hours. Mr. A, who currently employs six part-time workers on weekdays and weekends, said, "Even without considering weekly holiday or night shift allowances, the costs are quite high," adding, "I will work more on weekends now."

Mr. B, who employs only two part-time workers on weekends, said, "On weekdays, my husband and I alternate working, usually about 13 hours a day," lamenting, "If we don't do this and rely on part-timers, we will really be in the red."

Mr. C, who runs a cafe in Chungmuro, has been operating alone without part-time workers since 2019 due to the minimum wage increase. Mr. C said, "We used to have about four people working together, but with the sudden rise in minimum wage, I am working alone due to labor cost burdens," adding, "When the minimum wage increase is linked to the weekly holiday allowance, it feels even heavier than it appears."

There are also voices predicting an increase in self-employed business closures. Yang Ran-mo, who runs the Dakhanmari restaurant, said, "Recently, there are predictions that more than 10% of stores in the offline sector will close by the end of this year or early next year," adding, "I hear that the impact could be greater than the closures during COVID-19."

Mr. A, who runs a convenience store, also said, "I think more stores will close now," adding, "When stores close, part-time workers quit too, creating a vicious cycle."

Officials from the Korea Federation of Micro Enterprise hold a press conference appealing to the public to freeze the minimum wage in front of the Ministry of Employment and Labor at the Government Sejong Complex, where the 7th Minimum Wage Commission meeting is held on the 28th.
[Image source=Yonhap News]

Meanwhile, the Korea Federation of Small and Medium Business issued a statement on the 30th of last month regarding the minimum wage increase, saying, "Small business owners are already suffering from a triple hardship of COVID-19, soaring raw material prices, and high interest rates, threatening their survival," and "This minimum wage increase is an irresponsible decision that pushes small business owners who are barely holding on to the edge of a cliff."

On the same day, the Korea Convenience Store Owners Association also released a statement saying, "This minimum wage decision completely ignores the desperate situation where half of convenience stores cannot earn a single penny despite long working hours," and "We absolutely cannot accept a decision that causes conflict between the weak and weak and drives convenience store owners who cannot afford to pay the minimum wage into criminals."