'7.9 million small businesses can't survive this': Merchants' group formally contests minimum wage hike

The Korea Federation of Micro Enterprise has formally contested the government's decision to set next year's minimum wage at 10,700 won ($7) per hour, urging a review of the ruling. The group said the additional labor cost burden — coming amid an economic slowdown and sluggish domestic demand that have already pushed small business owners to the limits of what they can pay — will accelerate job cuts and business closures.

The federation held a press conference Monday morning outside the Ministry of Employment and Labor in Sejong and announced it had formally submitted a letter of objection to the ministry against the "2027 minimum wage proposal." It is the first time the group has filed such an objection since 2022, four years ago.

The Minimum Wage Commission had earlier voted to set next year's minimum wage at 10,700 won per hour — a 3.7 percent increase, or 380 won, from this year — and the Employment Ministry officially announced the figure on July 16. The monthly equivalent, based on a 40-hour workweek, is 2.24 million won.

"In monthly salary terms, this amounts to an increase of about 79,000 won, or roughly 950,000 won annually," federation chairman Song Chi-young said. "For a business employing four people, the additional cost including social insurance contributions comes to more than 10 million won a year." He added that "amid the double burden of falling revenues and a sluggish economy, this increase is a decision that will hasten job cuts driven by small businesses."

The federation said the minimum wage decision ignored the realities facing small business owners. In its letter of objection, the group cited three core problems: the limits of small business owners' ability to pay, the uniform application of the wage without accounting for differences in paying capacity across industries, and a deterioration in employment quality driven by a rise in ultra-short-hour workers. It particularly said that despite the Minimum Wage Act explicitly listing employers' ability to pay as a criterion for setting the wage, the dire situation of small business owners had been thoroughly ignored.

The federation noted that total outstanding loans held by self-employed workers reached a record 1,092.9 trillion won at the end of last year, saying "the ability to absorb further labor cost increases is eroding." It added that the delinquency rate among vulnerable borrowers soared from 4.36 percent at the end of 2021 to 12.14 percent at the end of last year. The group also said the closure rate among the six major small-business sectors stood at 11.08 percent, higher than the 8.64 percent average across all businesses.

The federation also called for differentiated minimum wage application by industry. It said that as of 2024, the share of workers in the accommodation and food service sector earning below the minimum wage stood at 33.9 percent, while the figure for the information and communications sector is no more than around 2 percent, arguing that policy reform must account for differing business conditions across industries.

In addition, the group pointed to years of growth in ultra-short-hour workers — those working fewer than 15 hours a week — warning that minimum wage increases could encourage businesses to shorten operating hours, expand automation and rely more on family labor.

"Four in 10 small business owners earn less than 2 million won a month in operating profit, meaning they cannot even take home the monthly minimum wage equivalent of 2.24 million won," Chairman Song said. "A review of the minimum wage proposal is necessary to protect the survival of small business owners on the edge and to prevent an employment crisis."

The federation called on the government and the National Assembly to review the minimum wage alongside a set of additional demands: differentiated application by industry, an overhaul of the minimum wage-setting structure, and the revival of a job stability fund. The group added that it "will mobilize every available means to respond, including considering administrative litigation, to reform the current minimum wage system."