SME Sector "Minimum Wage Must at Least Be Frozen"... A Desperate Appeal

Joint Statement on Minimum Wage by 14 SME Organizations
"Laws Restricting Businesses Are Flooding In... The Current Level Must Be Maintained"

"The Serious Accident Punishment Act, the Labor Union Act, the Holiday Act, and other laws that constrain small and medium-sized enterprises (SMEs) are being introduced all at once. Next year's minimum wage must be at least frozen."

On the morning of the 5th, 14 SME organizations including the Korea Federation of SMEs, the Korea Women Entrepreneurs Association, and the Korea Federation of Micro Enterprise held a press conference at the Federation of SMEs in Yeouido to announce the "2022 SME Sector Position on the Minimum Wage." They expressed both desperate appeals and, on the other hand, pleaded using various economic statistics.

The SME sector stated that unlike large corporations, micro and small enterprises find it difficult to feel the recent economic recovery and that to reduce business burdens and improve employment issues, the minimum wage should be maintained at this year's level (8,720 won). They also emphasized that the business environment for SMEs is difficult due to increased raw material prices, sluggish domestic demand, and logistics crises amid growing uncertainties caused by the COVID-19 pandemic.

The SME sector revealed survey results showing that even at the current minimum wage level, the minimum labor cost per employee borne by companies is 2.27 million won per month. The monthly minimum wage based on a 40-hour workweek this year is 1,822,480 won, but when adding legally mandated costs such as the four major social insurance premiums (206,581 won) and retirement allowances (151,874 won), it was calculated that at least 2.27 million won per month is required to employ one worker.

In fact, due to the sharp increase in the minimum wage, companies' payment capacity has become insufficient, paradoxically resulting in 3.19 million workers, or 15.6% of all workers, not receiving the minimum wage. The industry also presented data from the Bank of Korea showing that last year's increase in SME loans was twice the usual level, indicating a significant deterioration in financial conditions.

Leaders of SME organizations appealed, "Even now, 4 out of 10 SMEs are barely surviving on government subsidies," and urged, "Please do not ignore the desperation of SMEs and micro enterprises."

The industry also stated that laws pressuring companies, such as the Fair Economy 3 Acts, the Regulation 3 Acts, the Serious Accident Punishment Act, the Labor Union Act for compliance with International Labour Organization (ILO) conventions, and the Substitute Holiday Act, are about to be enforced, so increasing the minimum wage should not add to the burden on companies. Last month, the National Assembly passed the Substitute Holiday Act, which expands substitute holidays beyond Lunar New Year, Chuseok, and Children's Day to other public holidays.

If this law is implemented, substitute holidays will be designated for Liberation Day, National Foundation Day, Hangul Day, and Christmas in the second half of this year. With the 52-hour workweek system expanded to workplaces with fewer than 50 employees starting this month, concerns have been raised that an increase in substitute holidays will lead to higher labor costs such as holiday pay and production disruptions.

According to a recent survey of 600 SMEs conducted by the Federation of SMEs and the Korea Employers Federation, 68.2% reported that their current business conditions have worsened compared to before COVID-19, and 40.2% said it is difficult to pay wages normally. As responses to a minimum wage increase, 41.0% cited employment reductions such as reducing new hires (28.2%) and cutting existing staff (12.8%), while 35.2% said they have no countermeasures at all. This indicates that employment cuts are inevitable due to labor cost burdens.

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