As discussions on next year's minimum wage commence, small and medium-sized enterprises (SMEs) are urging for a freeze. Many businesses are already struggling due to high inflation and interest rates, raising concerns that further increases could exacerbate their financial crises.
On June 23, the Minimum Wage Commission held its eighth plenary meeting at the Sejong Government Complex to officially begin discussions for the 2027 minimum wage. Labor representatives proposed an initial demand of 12,000 won per hour, a 16.3% increase from this year, which translates to a monthly salary of 2,508,000 won based on a 209-hour work month. In contrast, business representatives are advocating for the wage to remain at this year's level of 10,320 won per hour.
On the same day, SMEs held a press conference at the Korea Federation of Small and Medium Enterprises in Yeouido, Seoul, where they officially called for a freeze on the minimum wage. Participants argued that any increase would threaten the survival of SMEs already struggling under the pressures of high inflation, soaring oil prices, fluctuating exchange rates, and rising interest rates.
Kim Hyun, chairman of the Korea Reinforcing Bar Processing Cooperative, stated, "An increase in the minimum wage will further tighten the already struggling small manufacturing sector, which is losing competitiveness due to sluggish domestic demand and rising labor costs." Lee Joong-hak, policy director of the GS25 Management Council, added, "The burden of rapidly rising labor costs is falling heavily on small business owners. If they collapse, local economies will be shaken, ultimately impacting the national economy," emphasizing the need for a wage freeze.
The sense of crisis among SMEs is significant. A survey conducted by the Korea Federation of Small and Medium Enterprises from May 19 to June 10 found that 60.4% of the 994 SMEs and small business owners reported that their management conditions had worsened compared to last year.
Moreover, 77.6% of respondents indicated that this year's minimum wage has been a burden on their operations. Consequently, a majority of respondents called for next year's minimum wage to either be frozen (41.5%) or reduced (21.0%). Nearly half (48.6%) stated that if the minimum wage rises to an unbearable level, they would reduce hiring or lay off existing employees.
Many self-employed individuals also expressed that they would have to consider closing their businesses if the minimum wage increases. A survey conducted by the Korea Economic Association from May 14 to 18 among 500 self-employed individuals revealed that one in three (34.0%) reported their average monthly income fell below the minimum wage for workers (2,156,880 won, based on a 40-hour work week). Among self-employed respondents, 14.6% indicated they would consider closure if the minimum wage rises by 1-3%, while 13.8% stated that a rise of 15% or more, as demanded by labor groups, would make closure unavoidable.
The SME sector is determined to push for a freeze on the minimum wage. They plan to strengthen their response to ensure that the voices from the field are reflected in the deliberation process. Lee Jae-gwang, chairman of the Labor and Workforce Committee of the Korea Federation of Small and Medium Enterprises, expressed concern that "an increase in the minimum wage that does not consider payment capabilities could push small businesses to the brink of collapse," emphasizing that next year's minimum wage must be frozen at the current level.
The legal deadline for minimum wage deliberations is 90 days from the date the Minister of Employment and Labor requests the review. This year, discussions must conclude by June 29. However, there is no legal enforcement, and historically, final decisions have often exceeded the usual timeframe. Even if the deadline is missed, the minimum wage proposal must be submitted to the Minister of Labor by mid-July, considering remaining administrative procedures. The Minister will finalize and announce the minimum wage by August 5, which will take effect on January 1 of the following year.
Notably, there has never been a case of a wage freeze in the history of minimum wage deliberations. Over the past five years, the minimum wage has increased annually, reaching 9,160 won in 2022 (a 5.1% increase from the previous year), 9,620 won in 2023 (5.0%), 9,860 won in 2024 (2.5%), 10,030 won in 2025 (1.7%), and 10,320 won in 2026 (2.9%).
* This article has been translated by AI.
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