This time it was the Middle East war. With high wages and high interest rates compounded by a rise in oil prices, raw material prices are jumping. A structure is hardening in which small business owners cannot make a profit.
Korea Federation of Micro Enterprise (KFME) President Song Chi-young assessed the current business conditions for small business owners this way in an interview with ChosunBiz on the 6th. He noted that as external shocks repeat and the expense-rising structure becomes entrenched, the revenue base of small business owners is collapsing.
Song said, "This is not a simple economic downturn but a structural crisis in which the very lifeline of small business owners is collapsing," adding, "In a situation where rent, labor costs, raw materials and food ingredients, and loan interest are all rising at the same time, it is difficult to make a profit through normal operations."
Song said, "Government policy is also out of sync with the reality of small business owners." The Korea Federation of Micro Enterprise (KFME) recently launched a national petition urging a halt to enacting the "basic law for working people," and it also expressed opposition to the government and ruling party's plan to allow early-morning delivery by big-box retailers. He also criticized the overall labor policies, including the introduction of a 4.5-day workweek and the minimum wage hike, for failing to reflect reality while only increasing the expense burden.
Song emphasized, "While speaking of supporting and fostering small business owners, actual government policies are working in ways that increase the burden," adding, "If this continues, the survival base of small business owners will inevitably collapse more quickly."
The Korea Federation of Micro Enterprise (KFME) is a statutory body established in 2014 under the Act on the Protection and Support of Small Business Owners and represents 1 million small business owners nationwide. Song took office as president of the Korea Federation of Micro Enterprise (KFME) in Aug. 2024. He is a small business owner who runs a tool distribution company and served as president of the Korea Industrial Hardware Association. The following is a Q&A with Song.
— What is the current business situation for small business owners?
"This is not a simple slump but a structural crisis. Sales are decreasing while expenses are rising at the same time, and this has become entrenched. With heavy burdens from rent, labor costs, and loan interest, the expense pressure has grown further as the Middle East situation pushed up oil and raw material prices. On the ground, it is commonplace to hear, 'The more we do business, the more debt we incur.' We have already entered an era of 1 million closures. A closure no longer ends as an individual's failure. When one store shuts down, it leads to contractions in the local commercial district, jobs, and consumption."
— You oppose government labor and distribution policies such as the basic law for working people, early-morning delivery by big-box retailers, and the 4.5-day workweek.
"Policy is not reflecting the field. Small workplaces lack manpower and financial capacity. If you introduce systems uniformly in such circumstances, only expenses and responsibilities increase, ultimately leading to reduced hiring or closures. We agree with some of the intent behind the basic law for working people and the 4.5-day workweek, but if applied without preparation, the burden of labor costs and operational risks will inevitably surge. In particular, for small business owners with no manpower slack, it effectively functions as an additional regulation.
Allowing early-morning delivery by big-box retailers is in the same vein. We recognize consumer convenience, but it creates a structure that is more favorable to large distributors with overwhelming capital and logistics networks. Traditional markets and neighborhood commercial districts will inevitably be further squeezed. Even if change is needed, it is not desirable to concentrate the burden on the weakest actors without social consensus."
— You have consistently raised the issue of expense burdens such as the minimum wage increase.
"Expenses keep rising and nothing is going down. Labor costs, taxes, and various expenses are piling up. At times like this, at a minimum, conditions must be created to catch our breath. Right now, the structure does not even allow time to endure."
Since taking office, over about 1 year and 7 months, President Song Chi-young has focused on elevating the status of small business policy. In the process, he led the creation of a dedicated Vice Minister for small business within the Ministry of SMEs and Startups, and expanded the federation's membership from 700,000 to 1 million. Song emphasized, "The policy foundation has been prepared to some extent," adding, "Now it needs to translate into tangible results that can be felt in the field."
— At a recent labor policy forum of the Economic, Social and Labor Council, you argued for a "labor-management-government-small business" framework including small business owners, instead of "labor-management-government."
"Under the Lee Jae-myung administration, social dialogue has resumed, but small business owners are currently left out of the structure. In reality, small business owners are business owners while also having the character of workers. Discussions that exclude them are hard to reflect conditions on the ground. It is time to change the discussion structure itself."
— Some say restructuring of the self-employed sector is necessary.
"I acknowledge overconcentration in some sectors. But pushing people out under the name of restructuring is dangerous. Reemployment, career transitions, and the social safety net must come first. Also, managing the entry stage is important. If we leave in place a structure where people start businesses without preparation, it causes socioeconomic damage not only to individuals but also to society. We need to institutionalize a certain level of education and preparation process."
— It is also important for small business owners to build competitiveness on their own.
"Yes. While support is needed for changes in the external environment and structural difficulties, competitiveness must be created independently. Even within the same industry, there must be differentiated strengths. If you stick to past methods, it is hard to survive. You must keep innovating and prepare for growth."
— What are the response plans for the expansion of platform and delivery markets and the spread of AI?
"It is clear this is an irresistible trend. The problem is the cost structure. Right now, the platform cost structure is imposing an excessive burden on small business owners. AI and digital transformation are also important, but there are limits to small business owners responding on their own. The government needs to play a more systematic role in creating a fair market environment and supporting digital transformation and AI transformation (AX)."
— You stress that small business owners should be seen as agents of economic growth.
"It is also important to break away from viewing small business owners only as 'economically vulnerable.' As growth centered on large corporations has reached its limits, we now need to see small business owners as key actors in the economy. We must build an ecosystem in which small business owners can innovate and grow. Policies and systems must be reorganized accordingly. In addition, we should move beyond the structure of six economic groups centered on the Korea Chamber of Commerce and Industry (the Korea Chamber of Commerce & Industry), The Federation of Korean Industries, the Korea International Trade Association, the Korea Enterprises Federation, the Korea Federation of Small and Medium Enterprises, and the Federation of Middle Market Enterprises of Korea (FOMEK), to a structure of "seven economic groups" including the Korea Federation of Micro Enterprise (KFME). Only if small business owners survive can the Korean economy continue to grow sustainably."