South Korean SMEs call for freeze in minimum wage next year

2019.05.24 09:47:19

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More than half of small- and medium-sized enterprises (SMEs) in South Korea are calling for a freeze in the country’s minimum wage next year following the steep hikes in the last two years, which have added woes to their business already grappling with dismal economic conditions, data showed Thursday.

According to a survey conducted by Korea Federation of SMEs on 600 enterprises on their opinions on the rising pace of the country’s minimum wage in 2020, 69 percent said the rate should freeze next year.

The survey showed that 62.6 percent of the respondents saw this year’s minimum wage level “high,” with 26.8 percent responding “extremely high” and 35.8 percent “slightly high.” More than 70 percent of small businesses with less than five employees, in particular, said this year’s minimum wage is high. More than 77 percent of them hoped the minimum wage to remain unchanged next year.

Korea raised the country’s minimum wage by double digit last year from a year ago to 7,530 won ($6.3) per hour. This year, the minimum wage has been raised by another 10.9 percent to 8,350 won per hour, increasing burdens on businesses.

The survey also showed that 55 percent of 600 companies said the government’s recent move to revise the procedure for determining the minimum wage hike is “necessary,” with only 31.2 percent responding “unnecessary.” A majority of the companies that favored revision in the procedure proposed different minimum wage levels for businesses depending on their size, 29.7 percent proposed the government should reflect businesses’ payment capability, 19.5 percent longer decision cycle, and 15.3 percent dual decision structure.

The survey also showed that 83.2 percent of SMEs said reflecting fixed bonuses and welfare benefits in phases within minimum wage limits is “not helpful” as 68.1 percent do not have separate bonus or welfare expenses or the amount is very small. Another 18.5 percent said it is difficult to reflect expenses because of the complex calculation method while 13.4 percent said the rise in minimum wage is higher than the included expenses.

Reflecting SMEs’ opposition against a freeze in minimum wage, the federation has urged the government to set a foundation for individual application of the minimum wage on small business and foreigners. It also urged the government to freeze the minimum wage next year.

By Seo Chan-dong and Lee Eun-joo

[ⓒ Pulse by Maeil Business Newspaper &, All rights reserved]