Value context and insight. lkm@koreatimes.co.kr
Salaried workers, self-employed poles apart on economy
By Lee Kyung-min
By Lee Kyung-min
Lee Jong-whan, 64, who runs a Korean food restaurant in northern Seoul, says every day is a challenge to keep his business afloat due to the hourly minimum wage hike and shorter work-week.
Those are key economic policies of the Moon Jae-in administration defined by a near 30 percent increase in the hourly minimum wage over the past two years and a reduction in maximum working hours to 52 a week from 68.
“My restaurant usually makes 600 million won ($512,820) a month, but this has gone down 30 percent over the past few months mostly due to increased labor costs,” said Lee, who has run the restaurant for 24 years.
Left with few options, he has cut employees' working hours to avoid paying extra.
“The minimum wage is set at 8,350 won, but with the extra that must be paid every week for the five working days, it well surpasses 10,000 won. If we don't pay this amount, we will be punished.”
He said that after paying taxes, making 10 percent of monthly sales as net profit was considered “highly handsome,” which was rare for most eatery owners. About 75 percent of the small eateries made less than 200 million won per month, he said.
“The actual amount they make barely covers operating costs, making them wonder whether they should shut down the business altogether,” he said.
On the other hand, an office worker in her 30s surnamed Kim said her company recently gave all workers a raise, a result of collective bargaining by the union.
“I got a 5 percent raise in my annual salary and the agreement between the company management and union guarantees the raise will be applied to next year's salary as well,” said Kim.
She plans to spend more money on buying items she has long kept in her online shopping cart, a gift to herself for working hard.
“I have been meaning to buy rather expensive cosmetics for some time, which I think I deserve given how hard I have worked,” she said.
Such contrasting views in consumer sentiment between the self-employed and salaried workers are reflected in recent data from the central bank.
According to the Bank of Korea (BOK), the composite consumer sentiment index (CCSI) stood at 101.6 in April, up 1.8 points from a month earlier.
A reading under 100 means pessimists outnumber optimists.
Specifically, the Consumer Survey Index (CSI), whose measures include how people feel about overall economic conditions for the next six months, stood at 73 for the self-employed, down 1 point from the previous month.
The index for salaried workers, however, was measured at 86, up 4 points.
This means the gap between the two groups widened to 13 points, the widest since the BOK began compiling data in 2008.
Similarly, a separate CSI on people's sentiment on economic conditions also showed the two groups remained 12 points apart.
The index for the self-employed stood at 66, while that for salaried workers was 78, up 3 points and 4 points from the month before, respectively.
For the monthly index, the BOK surveyed 2,330 households from April 11-18.
The widening gap shows the self-employed are struggling more under the Moon administration's strategy of income-led growth, according to an economist.
“Many self-employed, including owners of the small eateries, have been struggling as shown by the cut in workers' hours,” said Yun Chang-hyun, an economist at the University of Seoul.
“The government intended to boost employment by cutting the maximum working hours, but without due measures to absorb shocks induced by rising labor costs, the situation will continue to drive the economically vulnerable closer to bankruptcy.”