88% of Domestic SMEs Say Minimum Wage Should Be Frozen or Lowered Next Year

[Asia Economy Reporter Suyeon Woo] It has been revealed that 88% of 600 major domestic small and medium-sized enterprises (SMEs) expressed the opinion that next year's minimum wage should be frozen or lowered.

The Korea Employers Federation and the Korea Federation of SMEs announced on the 1st that, according to the results of the "Survey on Employment Difficulties and Minimum Wage Opinions of SMEs" conducted from May 6 to 13 targeting 600 domestic SMEs, 88.1% of companies responded that next year's minimum wage should be frozen or lowered.

According to the survey results, regarding the appropriate level of next year's minimum wage, 80.8% answered it should be frozen, and 7.3% said it should be lowered. This is the highest level among surveys conducted over the past five years and is even higher than last year, when companies faced difficulties due to nearly a 30% increase in the minimum wage over the past two years.

Furthermore, when asked about their response if next year's minimum wage increases compared to this year, 44% said they would reduce new hires, and 14.8% said they would choose layoffs. In other words, more than half (58.8%) of SMEs have set a strategy to respond to minimum wage increases by reducing employment.

This response appears to reflect the recent deterioration in the business environment. Among the companies participating in the survey, 76.7% answered that their current business situation has worsened compared to the previous year, and 65.7% responded that the situation will worsen further in the second quarter.

Expected Timing of Workforce Reduction (Targeting 600 Small and Medium Enterprises, Unit: %)/Source=Korea Employers Federation

Regarding the timing when layoffs would be inevitable if the current situation continues, 33% of companies said layoffs would be unavoidable within six months, and 45% said within nine months.

Additionally, more than half of the companies (56.5%) predicted that even after the end of the COVID-19 pandemic, the current difficulties would persist, and they forecast that it would take at least six months or more for business and employment conditions to recover.

Ha Sang-woo, Head of the Economic Research Department at the Korea Employers Federation, said, "As the real economy downturn caused by COVID-19 is intensifying and its effects are expected to continue next year, the minimum wage for next year should be decided with the economy and job retention as the top priorities."

Lee Tae-hee, Head of the Smart Job Department at the Korea Federation of SMEs, added, "Since our economy and employment levels are in a very severe situation, with negative growth expected, it is desirable for labor, management, and government to prioritize job preservation and agree to at least freeze next year's minimum wage rather than engage in futile disputes."

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