Self-Employed Struggling with Labor Costs... But Closing a Business Is Not Easy Either

74% of Small Business Owners Cite "Labor Cost Burden," 64% Are "Considering Closure"
Conflicts with Landlords Over Restoration, 400 Monthly Legal Consultations at Sojingong

Workers are dismantling facilities at a closed store.
Photo by Mun Ho-nam munonam@

[Asia Economy Reporters Kim Jong-hwa, Kim Bo-kyung] Seo Soon-young (alias, 53), who runs a convenience store in Seomyeon, Busan, recently decided to let go of one part-time worker and increase her own working hours. Seo said, "I feel heavy-hearted thinking about the part-timer who works to earn pocket money, but I had no choice due to the burden of labor costs." This is because with the minimum wage rising every year, once the hourly wage exceeds 10,000 won, the monthly cost for part-time workers alone exceeds 2 million won. Last year, Seo’s average monthly profit was about 3.5 million won, and she sighs, feeling uncertain about how much longer she can endure.

Moon So-young (alias, 43), who closed her clothing store in Mapo, Seoul, had a conflict with her landlord over facility removal and restoration issues and sought legal advice from the Small Enterprise and Market Service. The landlord said, "Since there are nail marks left on the wall, I will deduct 200,000 won from the 30 million won deposit and return the rest." When Moon questioned, "Isn't that too harsh?" the landlord retorted, "If you feel wronged, file a lawsuit." Moon hesitated to sue over just 200,000 won, fearing the legal costs would be higher, so she applied for legal consultation.

Tears of small business owners and SMEs have not dried up. When running a business, they cry over the burden of employee wages, and after closing, they suffer from landlords’ abuse of power.

On the 24th, at the Minimum Wage Commission deciding next year’s minimum wage, the workers’ side demanded 10,800 won, a 23.9% (2,080 won) increase from this year. The employers’ side requested the same 8,720 won as this year. Small business owners and SMEs are restless at the news that the minimum wage, already burdensome at this year’s level, might rise again.

According to the ‘2022 Minimum Wage Impact Survey on Small Business Owners’ recently released by the Korea Federation of Small and Medium Business, 74.1% responded that they feel burdened by the current minimum wage. Regardless of next year’s minimum wage changes, 43.8% said they are ‘considering closure,’ and 20.5% (107 people) responded that they would consider closing if the minimum wage increases by about 1-5%.

A representative from the Federation said, "Although the economy is expected to recover due to vaccinations, this applies only to certain industries, and small business owners still face a difficult management environment," adding, "If differential application by size and industry is not implemented, the number of small business owners and self-employed people closing due to labor cost burdens will increase."

The burden of labor costs is the same for SMEs. Lee Jeong-cheol (alias, 57), who runs a small manufacturing company in Gyeongnam, said, "Due to COVID-19, there have been disruptions in securing foreign workers, and a strange phenomenon has occurred where foreign workers choose workplaces that pay slightly higher wages."

Kim Dong-hyun, chairman of the Gyeonggi Foundry Industry Cooperative, said, "The root companies with a high proportion of foreign workers are severely affected by the minimum wage increase," adding, "If the minimum wage rises, foreign workers will avoid factory work, worsening the labor shortage." He revealed, "From this month, the 52-hour workweek system applies to companies with fewer than 50 employees, and with the worsening shortage of foreign workers, many companies are struggling to meet delivery deadlines."

Even after closure, small business owners are hurt again by landlords’ abuse of power. The number of requests for free legal advice and consultation through the Small Enterprise and Market Service from small business owners who have closed or plan to close reaches about 400 cases monthly, most of which ask for solutions to conflicts with landlords over facility removal.

Attorney Kim Ho-jin of Law Firm Yulwoo said, "Many small business owners who have closed ask how to deal with landlords’ abuse of power, such as ‘Don’t leave even a single nail mark,’ ‘I will deduct some amount from the deposit because restoration was not done properly,’ and ‘If you feel wronged, sue,’" adding, "Disputes can arise depending on the extent of the restoration obligation, but most cases are ruled against landlords’ excessive demands."

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