'Nothing is left.' This phrase has become common among self-employed individuals and small business owners. Once a dream for a second life after retirement, their shops have turned into burdens threatening their livelihoods, with many struggling businesses now closing their doors. The term 'era of 1 million closures' is no longer an exaggeration; the crisis facing our local economies is severe.
According to the Ministry of SMEs and Startups, 976,000 businesses closed last year due to poor domestic sales and declining revenues. Before shutting down, many faced worsening management conditions due to falling sales and rising costs. After closure, they reported experiencing livelihood insecurity and a lack of pathways to restart their businesses. Notably, the number of closures in the six major sectors where small businesses primarily operate, such as food and services, reached 751,000, with a closure rate of 11.08%, exceeding the overall average.
Small businesses are the backbone of our economy, serving as vital capillaries supporting local economies and providing significant employment. However, the current environment is colder than ever. Prolonged high inflation, rising interest rates, and a decrease in consumer spending have led to fewer customers and stagnant sales. While consumers are tightening their wallets, rental and raw material costs remain high, further squeezing profits.
To make matters worse, the burden of labor costs is increasing. The minimum wage is a crucial system for ensuring the livelihood of vulnerable groups. However, rapid increases that do not adequately consider economic realities and the payment capabilities of different sectors can become an unbearable burden for small business owners. Some argue that evaluating small businesses alongside large corporations and high-productivity workplaces ignores the realities they face.
In a situation where sales are not increasing but labor costs continue to rise, options become limited. Business owners may reduce staff, shift to family-run operations, shorten operating hours, or ultimately choose to close. Although minimum wage increases aim to boost workers' incomes, if they lead to job losses and more closures, the good intentions behind the policy can backfire in practice. Ultimately, when jobs disappear, both workers and small business owners become victims.
In reality, complaints such as 'I want to hire more employees, but I can't afford the labor costs' and 'We can't survive without family members working unpaid' are common. The increase in closures does not only affect individuals; it leads to a decline in entire commercial districts and a contraction of local economies, resulting in a vicious cycle of financial instability and employment insecurity. The crisis facing small businesses should not be taken lightly, as it is a crisis for our economy as a whole.
It is crucial for the government to find a balance that preserves the intent of the minimum wage while also protecting the survival of small businesses. Most importantly, immediate and practical support measures for small business owners on the brink of collapse are urgently needed. One-time cash assistance alone cannot resolve structural difficulties. Comprehensive measures that can be felt on the ground, such as expanding employment support to alleviate labor cost burdens, providing low-interest policy funds, reducing rental and utility costs, enhancing tax support, and supporting digital transformation and online sales channels, must be established. Building safety nets to assist with re-establishment and industry transitions is just as important as reducing closures.
The economy operates on the ground. If small businesses collapse, local economies will also falter, and without a thriving local economy, domestic consumption cannot recover. A shift in perception is needed, viewing small businesses not merely as recipients of support but as key economic players sustaining the South Korean economy.
Government policies must consider reality over ideals and sustainability over mere justification. While the public purpose of the minimum wage is important, the economic conditions and market realities that can support it must not be overlooked. Even well-intentioned policies will ultimately fail to protect anyone if they cannot withstand the pressures on the ground.
* This article has been translated by AI.
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