A survey found that microbusiness owners are responding to the burden of minimum wage hikes by cutting jobs and working more themselves.
The Korea Federation of Micro Enterprise (KFME) on the 21st released the results of a survey on the impact of the minimum wage conducted with 700 microbusiness owners nationwide. According to the results, 87% of respondents said the current minimum wage is a burden on management. By sector, coffee shops, manufacturing, and hair and beauty reported higher rates of burden.
In this survey, the enterprise's average monthly sales and operating profit were found to have increased compared with 2024. However, it was analyzed that the gains were driven more by defending revenue through expense cuts than by growth from improved business conditions. It is a structure that maintains profitability by reducing labor costs.
Responses saying they feel price inflation came to 59.9%. In food and lodging and in convenience store and supermarket sectors, 65.1% each said they feel the burden of rising prices. Despite inflation, 76% of all respondents said it is effectively difficult to raise prices of products or services.
The labor cost burden led to changes in employment structure. The number of full-time employees was found to have decreased an average of 5.9% per year from 2024 to this year. The declines were relatively larger in hair and beauty (-20.63%) and coffee shops (-12.64%).
Business owners directly took on the duties of reduced staff. While workers' average weekly hours fell from 6.1 hours to 5.5 hours, representatives' weekly hours inched up from 10.0 hours to 10.1 hours.
The outlook for the economy was not bright either. Some 67% of respondents said sales fell from a year earlier and cited weaker consumption due to the economic downturn as the main reason. Changes in the business environment from digital transformation and rising prices were also identified as factors behind falling sales. A total of 67.9% said they feel anxious about maintaining current employment.
The most common response to rising labor costs was job cuts and a freeze on new hiring at 38.4%. Consideration of adopting unmanned and automated systems followed at 32.9%. In convenience stores, supermarkets, and coffee shops, reviews of installing kiosks and unmanned payment systems were active.
The factors squeezing operating profit were mainly rising energy expenses, higher rents, and increases in materials and supplies prices. In particular, 92.7% of microbusiness owners with employees said their operating profit decreased due to the minimum wage hike.
There was also a gap between the current minimum wage and microbusinesses' ability to pay. Among respondents who experienced a decline in operating profit, 54.7% chose 8,500 to under 9,000 won as an appropriate minimum wage to maintain current employment levels. For a level enabling additional hiring, 57.7% picked 8,500 won or less.
Song Chi-young, head of the Korea Federation of Micro Enterprise (KFME), said, "Microbusiness owners are facing a double whammy of subdued consumption amid an economic downturn and labor costs exceeding 10,000 won," and added, "Policy supplements such as sector-specific application of the minimum wage and the creation of a job stability fund are urgently needed for the survival of microbusinesses and a recovery in employment."