SMEs and Micro-Enterprises Say Minimum Wage Hike "Exceeds On-Site Payment Capacity... Urgent Need for System Reform"

2027 Minimum Wage Raised by 3.7%
Korea Federation of SMEs and Micro Enterprise Federation Express Regret
Calls for Systematic Reforms Reflecting Ability to Pay

The minimum wage set to be applied in 2027 has been raised by 3.7% to 10,700 won, prompting a chorus of concern from the small-and-medium-sized business community about the shock this will bring to worksites. This is because an increasing number of SMEs and micro-businesses are facing such poor conditions that it is already difficult to afford labor costs. Furthermore, the plan for industry-specific application of the minimum wage—which the business community has persistently called for—has once again failed to pass this year, making the outlook even more uncertain for vulnerable industries.

On July 15, the Korea Federation of SMEs expressed regret regarding next year’s minimum wage, stating that it is “a decision beyond what the field can afford to pay.” While pledging to “strive to comply with minimum wage requirements and maintain jobs,” SME stakeholders also said, “The government should swiftly come up with measures to ease the management burden on SMEs and micro businesses—which will inevitably increase due to the minimum wage hike—and to protect jobs for vulnerable groups.”

The Korean Federation of Micro Enterprise also stated, “This decision ignores the desperate appeals of 7.9 million micro-business owners who are struggling daily amid record debt levels and an economic downturn.” The federation pointed out that the rate of increase outpaces the inflation rate. Once weekly holiday allowances are included, it brings the hourly wage to 12,840 won, and the monthly wage will surpass the 2.2 million won mark.

Members of the Korea Federation of Small and Medium Business held a press conference opposing next year's minimum wage hike on the 2nd of last month in front of the Minimum Wage Commission at the Government Complex Sejong. Photo by Yonhap News Agency

Industry concerns over the minimum wage decision stem from the fact that, on top of this year’s ongoing Middle East conflicts, SMEs and micro-businesses have already been suffering from four overlapping pressures: high inflation, soaring oil prices, a weak won, and high interest rates. The added labor cost burdens could further strain management. According to a survey last month by the Korea Federation of SMEs, 60.4% of SMEs reported that their management situation had worsened compared to last year—a stark contrast to only 5.8% who saw improvement. A significant 77.6% cited the minimum wage as a key management burden this year. The business outlook for next year is also gloomy, with 47.6% expecting conditions to worsen.

The business community is also worried that the increased cost of labor could in fact reduce employment. The Korea Federation of SMEs stated, “Small and micro-businesses at their operational limits will be forced to reduce headcount or close down due to the excessive burden of labor costs, passing the hardship onto vulnerable workers.” The Korean Federation of Micro Enterprise added, “Every year, the rising minimum wage is worsening the business environment, and employment is actually decreasing as a result. The higher the rate of increase, the more paradoxically vulnerable groups have their jobs threatened by the minimum wage.” In related surveys, 48.6% of respondents said they would respond to a higher minimum wage by reducing new hires and cutting existing staff.

The continued rejection of industry-specific minimum wage applications this year is compounding the business community’s concerns. Industry representatives warn that minimum wage increases, which do not take into account businesses’ ability to pay, may backfire and drive SMEs and micro-businesses to the brink. An official from the SME community stated, “To create a sustainable minimum wage system, the application should be differentiated by industry, and the criteria for decision-making should be improved to reflect employers’ ability to pay.”

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