[The Editors' Verdict] Why Young People Are Reluctant to Work at SMEs

Small and medium-sized enterprises (SMEs) are all crying out that they have no people. Even if they manage to hire a ‘smart friend’ and train them diligently for several years, that ‘friend’ is eventually poached by large corporations or startups. This phenomenon is especially noticeable among early to mid-30s assistant managers or junior managers. What about production sites? Young workers needed in SME workplaces tend to avoid tough and dangerous jobs.

The shipbuilding industry is a representative sector facing labor shortages. Despite a long-awaited boom and an abundance of work, they struggle due to a lack of workers. What about rural areas and restaurants? There are several reasons. The first is money. Even if the work is hard and somewhat rough, if the pay is high, people flock to it. However, these places generally offer low wages. The lower the annual salary, the fewer attractive welfare benefits there are.

Therefore, the annual repeated opposition to minimum wage increases is understandable intellectually but hard to accept emotionally. For micro and small businesses or small business owners, labor costs are a matter of survival. The same applies to workers who earn their living on minimum wage. In reality, this is not a labor-management issue but a labor-labor (勞勞) conflict. Unfortunately, both sides suffer equally.

The second reason is vision. It would be difficult to find professional vision in the figure of a 20-year veteran welder at a subcontractor. The essence of the labor shortage in shipbuilding is not due to a social atmosphere or national tendency to avoid hard work. The absurd wage gap caused by the multi-tier subcontracting structure and the low wages of subcontracted workers lead to a loss of motivation, ultimately discouraging new entrants into the industry.

If the 52-hour workweek system reduces overtime pay at production sites, causing workers to leave or forcing them to take on ‘two jobs’ after work, that is not a problem caused by the 52-hour workweek system itself. If there are many people for whom long working hours are the only way to make a living, that is a challenge our society must solve. This is a different issue from the flexible application of the 52-hour workweek, but mixing these issues makes finding solutions even harder.

The third reason is the signboard. A workplace and business card represent one’s status. If all humans were extraordinary, there would be no worries, but reality is different. The ladder of social mobility is narrower than expected. Fourth is the mismatch in labor supply and demand. During reporting, I sometimes encounter surprising companies, but even they complain about labor shortages. This is especially true for B2B (business-to-business) companies in provincial areas.

The SME sector attributes the cause of labor shortages to the severe polarization between large corporations and SMEs. The unfair structures, called the ‘new three no’s of the economy’?unfair transactions, market imbalance, and institutional irrationality?are widespread, causing large corporations to take shares that should go to SMEs, solidifying polarization and leading to labor shortages. Statistics such as ‘the wage gap between large corporations and SMEs is more than double and has not narrowed over the past 10 or 20 years’ and ‘SMEs account for 99% of all businesses and 83% of employees but only 48% of sales and 25% of operating profits compared to large corporations’ clearly illustrate this polarization.

The institutional foundation to resolve polarization is now at the starting stage with the establishment of the Presidential Commission on Coexistence. While the Coexistence Commission cannot completely solve these complex intertwined problems, there is hope that if severe polarization improves, SMEs will gain greater competitiveness.

Kim Min-jin, Head of the Ministry of SMEs and Startups