[Reporter’s Notebook] Will the Minimum Wage Commission Once Again Bring Hardship to Both Small Business Owners and Employees This Year?

Kim, 67, who runs a gamjatang (pork bone soup) restaurant in the food alley of Dongjak-gu, Seoul, sighed deeply with a worn-out expression on the afternoon of the 10th when the reporter visited. Without any employees, he and his wife were serving lunch customers. He frowned as he said, "The minimum wage has eaten away at both me and my staff." Pointing to his wife sitting alone at a nearby table having a late lunch, he added, "Until three years ago, I had five employees, but now only one remains, and my family members have come out to work."

Park, 44, a convenience store owner in Gwanak-gu, sits at the cash register for 11 hours every day to reduce labor costs. At night, five part-time workers take turns working less than 15 hours a week in split shifts. Park said, "This is because of the burden of weekly holiday pay. If the minimum wage rises further next year, I will have to reduce the number of part-timers and work even in the middle of the night myself." Choi, the owner of a cafe in Yeongdeungpo-gu, let go of all part-time workers this year, installed an order kiosk, and now works alone.

The legal deadline for deliberating next year’s minimum wage, on the 27th of this month, is just two weeks away. Small business owners are pleading that if the minimum wage, currently 9,860 won this year, surpasses 10,000 won next year, they simply cannot endure any further increases.

According to a recent report released by the Korea Federation of Small and Medium Business, the average annual growth rate of small business enterprises over the past three years was 0.9%. During the same period, labor costs rose by an average of 2.2% annually due to minimum wage increases. Since the rate of increase in labor costs is 2.4 times higher than the growth rate of sales and operating profits, small-scale small business owners, mainly in the service sector, cannot sustain their businesses. As a result, jobs held by workers employed by them disappear.

According to Statistics Korea’s announcement on the 12th, the number of people employed in ‘short-term jobs’ working between 1 and 17 hours per week reached a record high of 2.7 million last month. Split shifts, like those at Park’s convenience store, have become widespread due to labor cost burdens. The number of ‘solo owners’ (self-employed without employees) like cafe owner Choi in Yeongdeungpo reached 4,267,000 in 2022, marking the highest level in 14 years.

The small and medium enterprise sector is pleading for differential application of the minimum wage even for small business sectors. Lee Myung-ro, head of the Human Resources Policy Division at the Korea Federation of Small and Medium Business, said, "Given the reality of small business owners, the minimum wage should be frozen next year, but if that is difficult, at least the rate of increase should be different. Let’s start by applying this experimentally to convenience stores, lodging, food service, and other sectors with low ability to pay wages to workers." Professor Seok Byung-hoon of Ewha Womans University’s Department of Economics said, "There are almost no countries like ours that apply a single minimum wage across all industries. Most countries, such as Japan and the United States, determine minimum wages in detail according to region, age, and industry."

The need for differential application of minimum wages by industry has been pointed out repeatedly in recent years but has repeatedly failed at the Minimum Wage Commission. Last year, it even went to a plenary vote but was rejected. All employer representatives voted in favor, all worker representatives opposed, and the public interest representatives were split. This year’s Minimum Wage Commission is also said to have differing views among its members. If the minimum wage surpasses 10,000 won as it is, small-scale small business owners will be forced to lay off even more employees next year. For the sake of both small business owners and workers, the Minimum Wage Commission must narrow the gap in positions and agree on industry-specific differentiation.