[Inside Chodong] How to Change the Reality Where Owners Earn Less Than Part-Time Workers

The statement by Song Chi-young, President of the Korea Federation of Micro Enterprises, that "Even if the owner works breathlessly, they earn less than minimum wage employees—that is the reality," brings attention to the harsh conditions faced by small business owners in South Korea. As of 2024, the average monthly income for small business owners amounts to only 1.91 million won. Nearly half of all businesses make less than 830,000 won per month. Given these circumstances, a growing number of small business owners have been reducing employment and increasing their own working hours. Eventually, unable to endure any longer, over 1 million individuals closed their businesses in a single year.

It remains questionable whether this reality was adequately reflected in the decision-making process for the 2027 minimum wage. This is not because the minimum wage rose by 3.7%, but rather because the proposal to apply differentiated minimum wages by industry—which had been suggested as a solution to structural problems—was rejected. Article 4, Section 1 of the Minimum Wage Act clearly states that "the minimum wage may be determined by categorizing the type of business." Legally, differentiation by industry is possible, and yet, after it was applied only temporarily in the initial year of the system (1988), a single minimum wage has been maintained due to continued resistance from labor groups. Labor groups argue that applying different minimum wages by industry would institutionalize worker discrimination, asserting that it could reinforce discrimination against female and young workers. This year, proposals were even made to alleviate such concerns by introducing a pilot program in some restaurant businesses—suggesting that the minimum wage increase in these sectors be set at half the general rate, with the gap between sectors limited to a maximum of 10%. However, due to persistent opposition, these proposals failed to take any steps forward.

The issue of setting minimum wages by industry is discussed each year within the Minimum Wage Council, but because labor and management remain sharply at odds, the matter is brought to a vote without a consensus. With nine representatives each from labor and management typically casting opposing votes, the nine public interest members effectively hold the deciding power. As a result, the fate of small business owners in struggling sectors is determined each year by professors and researchers. Meanwhile, the number of small businesses forced to close due to an inability to pay the minimum wage continues to rise.

Institutional reforms are now essential to accurately reflect real-world conditions. On the ground, there is a growing call to establish a system that accounts for each industry's realities, rather than simply raising the minimum wage. Although the minimum wage burdens all small business owners, its impact varies across sectors. According to a recent survey by the Korea Federation of Micro Enterprises, coffee shops, manufacturers, and beauty salons ranked highest in terms of perceived minimum wage burden. Before the latest decision, public interest members of the Minimum Wage Council also recommended, "In the second half of this year, the Ministry of Employment and Labor should establish a task force to thoroughly review and study subjects, standards, and other aspects of the current minimum wage system, and develop comprehensive improvement measures." Now, the responsibility lies with the government. It is time to face the reality that small business owners are earning even less than part-time workers.

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