COVID-19 Hits Local Businesses Hard... Hankyung Research Institute Reports "Average Sales Plunge 43%"

Survey Results on 'Alley Commercial District Economic Status and Next Year's Minimum Wage Opinions' Targeting 24 Major Alley Business Sectors
Short-term Measures Needed Such as 'Tax Reductions', 'Simplification of Various Support Application Procedures', and 'Easing Loan Burdens and Conditions'
83.9% Support Freezing or Lowering Next Year's Minimum Wage

[Asia Economy Reporter Ki-min Lee] A survey result has emerged indicating that the alleyway commercial districts' economy will be directly hit by the novel coronavirus infection (COVID-19).

The Korea Economic Research Institute commissioned Research & Research, a polling agency, to survey policy managers of 24 major alleyway commercial districts (32 associations and cooperatives) regarding the "current economic status of alleyway commercial districts and opinions on next year's minimum wage." The results showed that the average sales in February to March this year are expected to plummet by 42.8% compared to the same period last year. The average net profit is also expected to decrease by 44.8%.

According to the survey results, regarding sales outlook by industry, 22 out of 24 industries responded that they expect severe sales declines compared to the same period last year. Sales in the clothing and furniture industries are expected to decrease by 85% and 80%, respectively. During the same period, net profits in 22 industries, including distribution (-95.0%), clothing (-85.0%), and furniture (-80.0%), are expected to experience severe downturns. No industries responded that net profits would increase.

Representatives of alleyway commercial district associations cited the main cause of sales and net profit declines as "economic contraction and sales slump due to decreased visitors and users" (93.3%). This was followed by rising labor costs such as minimum wage and four major insurance premiums (50.0%), rent increases (20.0%), intensified competition among small business owners in the same industry (10.0%), and increased loan principal and interest burdens (6.7%). They also responded that 63.4% of alleyway commercial districts would find it difficult to endure for six months.

Regarding minimizing damage to alleyway commercial districts due to COVID-19, the most necessary short-term measures were identified as tax reductions and extensions of payment deadlines for value-added tax and income tax (59.4%), simplification of application procedures for various support measures and prompt decision on support (53.1%), easing of loan burdens and loan conditions (46.9%), and expansion of direct support to affected businesses (15.6%).

Regarding next year's minimum wage, 83.9% of respondents favored freezing (58.1%) or lowering (25.1%) it. Only 16.1% responded that the minimum wage should be increased. The most urgent issue related to minimum wage system improvement was the differential application by region and industry (65.6%), followed by expanded support for minimum wage increases (46.9%), realistic adjustment of minimum wage calculation standards (21.9%), and expansion of the scope of inclusion (including allowances and in-kind benefits, 15.6%).

Choo Kwang-ho, Director of Economic Policy at the Korea Economic Research Institute, stated, "Alleyway commercial districts have already been struggling since last year due to the contraction of the real economy and the sharp rise in the minimum wage, but now the COVID-19 pandemic is bringing a severe cold wave." He added, "Financial and tax support measures must be strengthened and promptly implemented to guarantee the survival rights of micro and small business owners, and the minimum wage increase should be restrained to reduce the impact on alleyway commercial districts."

This content was produced with the assistance of AI translation services.