Kim Hyun-bin began his journalism career at Arirang TV from 2012 to 2017, specializing in defense, foreign affairs and the economy. In 2018, he joined The Korea Times, covering society and business, and is currently responsible for embassy affairs.
Small businesses cut hiring, work hours to cope with minimum wage hikes
A street with small restaurants bustles with people in Sinchon, Seoul. Korea Times file
By Kim Hyun-bin
By Kim Hyun-bin
Some small business owners have reduced their number of workers to cope with a steep rise in the minimum wage, a government report showed, Tuesday. While there has been speculation that the increasing minimum wage has forced small companies and mom-and-pop stores to curtail employment, it was the first time for the government to confirm the situation through a field study.
The Ministry of Employment and Labor disclosed the survey findings in a minimum wage discussion panel at the Korea Press Center in Seoul, Tuesday. The Korea Labor and Employment Relations Association conducted the survey from November to April on some 20 businesses in four industries that are largely affected by the minimum wage rise ― wholesale and retail, food services and lodging, small companies in factory complexes and car parts manufacturers.
“There has been a reduction of manpower in scores of companies, and many reduced both employment and working hours,” said Nho Yong-jin, business administration professor at Seoul National University of Science and Technology, who led the survey.
Business owners fired workers or reduced business hours by not operating during hours with low customer demand. Instead, they increased hiring of short-term part-timers during peak seasons. So more people are working less than 15 hours a week, and companies are not obligated to give them bonuses, leave, severance pay or perks.
Most food and lodging businesses have also suffered from the wage hikes and showed a trend of cutting either employment or operating hours, the study showed, while increasing the number of part-timers during peak hours.
“Many food and lodging businesses have changed work schedules to prevent an increase in total wages,” Nho said. “Also, there has been an increase in cases where the owners or their family members have been working more hours than before instead of a reduced number of workers.”
On the other hand, small manufacturers and car parts producers were less impacted by the rise in minimum wage as most workers have been earning more than the government-set minimum wage.
“Most of the employees have received over the minimum wage, so the wage hike has had less of an impact. However, some saw reduced working hours,” Nho said. “It might not seem like a big problem at the moment, but if the minimum wage continues to rise, it could impact the industry.”
In the current poor economy, the minimum wage hike has created an even higher burden on three of the four industries. The wholesale, retail, food and lodging industries have been suffering due to fierce competition and an increase in online sales, Nho noted.
“Especially for the lodging industry, prices have stayed idle for years due to increasing competition online,” Nho said. “Most franchise companies did not take measures to cope with the wage hike in their outlets. There needs to be more government policies to help out small businesses.”