Two out of three small business owners say "Minimum wage should be lowered"... the rest demand 'freeze'

Sogongyeon, Survey on Minimum Wage Payment Ability and Policy Status
83% of Respondents Say "Minimum Wage Should Be Applied by Industry"

O Sehee, President of the Small Business Association, along with small business owners, is holding a press conference to announce the 2024 minimum wage demand proposal. Photo by Hyunmin Kim kimhyun81@

Two out of three small business owners demanded a reduction in next year's minimum wage, while the remaining one-third requested a freeze. If the minimum wage increases, it is expected that they will have no choice but to reduce existing staff or put new hires on hold. Additionally, there was a consensus that differentiated minimum wages should be applied starting with industries that have a high proportion of small business owners.

The Korea Federation of Micro Enterprise (KFME) announced the results of the "Minimum Wage Payment Ability and Minimum Wage Policy Survey" conducted on 1,000 small business owners on the 8th.

64.5% of respondents said the minimum wage should be lowered next year, while 33.3% said it should be frozen. If the minimum wage increases, 58.7% of small business owners anticipated reducing new hires, 44.5% expected to cut existing staff, and 42.3% planned to shorten working hours for current employees (multiple responses allowed) in order to operate their businesses.

One in three small business owners (33.4%) responded that employment decreased due to the burden of the minimum wage increase. When asked about factors to consider in determining the minimum wage, they cited "living expenses of business owners (44.2%)" and "business conditions and payment ability (32.5%)."

83% of small business owners answered that "minimum wages should be differentiated by industry." Among those, the most common opinion (57.1%) was that differentiated minimum wages should be applied to industries with a high proportion of small business owners, and 31.6% said priority should be given to industries such as agriculture, forestry, fisheries, and accommodation and food services, where the rate of wages below the minimum wage is high.

Furthermore, when applying differentiated minimum wages, the primary considerations were industry (47.5%) and business size (41.2%). Analyzing the impact of minimum wage decisions on business owners, 79.7% responded that the current minimum wage (9,620 KRW) is "a significant burden to pay," and 20.0% said it is "a very significant burden."

More than half of small business owners (53.7%) perceived the minimum wage as high relative to labor productivity, indicating a substantial burden. In particular, the average monthly labor cost per employee hired by small business owners from January to April 2023 was 2.91 million KRW, a 10.4% increase compared to 2.608 million KRW during the same period in 2021. On the other hand, the average monthly operating profit of small business owners from January to April this year was 2.817 million KRW, about 100,000 KRW less than the average monthly labor cost (2.91 million KRW) during the same period.

While the annual average growth rate of operating profit for small business owners was only 1.6%, the labor cost growth rate reached 3.7%, ultimately identifying labor cost increases as a cause of difficulties for small business owners. The main reasons cited by small business owners for the decrease in operating profit this year were the minimum wage and rising energy costs.

O Se-hee, president of the Korea Federation of Micro Enterprise, said, "The results of this survey clearly reveal how much the minimum wage increase is making life difficult for small business owners," adding, "Next year's minimum wage should be frozen, and the legally mandated differentiated application by industry must be implemented."

This survey was commissioned by KFME to Innovation Research and conducted from the 8th to the 27th of last month. Using a proportional extraction method by industry and region, 1,000 small business owners nationwide (including 100 from last year's follow-up survey) were selected and surveyed through visits (telephone surveys for last year's follow-up cases).