61% of Small and Medium Enterprises Want Minimum Wage Reduction or Freeze

'Results on Difficulties Related to Minimum Wage' Released
High Burden of Minimum Wage Increase in Service Industry

Six out of ten small and medium-sized enterprises (SMEs) expressed a desire for a "minimum wage reduction or freeze."

The Korea Federation of SMEs announced the results of the "Survey on Difficulties and Opinions Related to the Minimum Wage for SMEs" on the 2nd. The survey targeted 600 SMEs in the manufacturing and service sectors.

61.6% of SMEs responded that the minimum wage for next year should be reduced or frozen. This was followed by a 2-3% increase (23.5%) and about a 1% increase (8.7%). The response rate for minimum wage reduction or freeze was 68.0% among companies with annual sales under 1 billion KRW and 64.5% in the service sector.

SMEs identified the main employment and labor factors worsening the business environment as minimum wage increases (64.8%), social insurance premium increases (39.5%), labor shortages (27.7%), and the conversion of public holidays into paid holidays (22.5%). The proportion of respondents who felt that this year’s minimum wage (9,860 KRW) was burdensome compared to their current business situation was 80.3%.

It was confirmed that the smaller the company size and the more the service sector, the higher the proportion of those experiencing difficulties due to minimum wage increases. Among companies with annual sales under 1 billion KRW, 74.0% selected "minimum wage increase" as a factor worsening the business environment, and 87.0% responded that this year’s minimum wage level was a burden on management, both higher than the average.

In the service sector, 70.0% and 43.3% selected "minimum wage increase" and "continuous increase in social insurance premiums," respectively, as factors worsening the business environment. The response that this year’s minimum wage level was a burden on management also reached 87.0%.

34.0% of SMEs said their business conditions worsened compared to last year. Regarding the outlook for next year’s business conditions, 19.2% responded "worsening," and 73.3% said "about the same level."

When asked about responses if the minimum wage rises beyond a bearable level, 42.2% of SMEs answered "no countermeasures," and 35.0% said "reduction in new hires." By industry, the service sector most frequently answered "no countermeasures" (53.0%), while manufacturing most frequently answered "reduction in new hires" (39.0%).

Lee Myung-ro, Head of the Workforce Policy Division at the Korea Federation of SMEs, said, "Considering the characteristics of our economy with a high proportion of small-scale self-employed businesses, the minimum wage for next year should be decided taking into account the payment capacity of these workplaces," adding, "It has been confirmed that acceptance of minimum wage increases varies by industry, so now it is necessary to apply differentiated standards by industry." The deliberation of the Minimum Wage Commission to set next year’s minimum wage level began on the 21st of last month.