Small business group, KCTU both challenge 10,700-won minimum wage

Members of the Korea Federation of Micro Enterprise hold a press conference in front of the Minimum Wage Commission at Government Complex Sejong on July 2, opposing a minimum wage increase for next year. [Yonhap]

The Korea Federation of Micro Enterprise and the Korean Confederation of Trade Unions (KCTU) have both formally objected to the government over next year's minimum wage of 10,700 won ($8) per hour, calling for a review. With the rate already voted on, the simultaneous challenges from both labor and management signal that the dispute is far from over.

KFME files first objection in 4 years, calls hike 'a blunder that strangles small businesses'

The Korea Federation of Micro Enterprise (KFME) held a press conference Monday morning in front of the Ministry of Employment and Labor in Sejong and announced it had formally submitted a letter of objection against the proposed minimum wage for 2027. It is the first time the group has filed such an objection since 2022.

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's rate, and the Ministry of Employment and Labor officially announced the figure on July 16. The monthly equivalent based on a 40-hour workweek comes to 2.24 million won.

KFME President Song Chi-young said the increase amounts to roughly 79,000 won more per month, or about 950,000 won more per year. "For a business employing four people, the additional cost — including social insurance contributions — comes to more than 10 million won a year," he said. He added that the hike "will accelerate job cuts among small businesses, which are already struggling under the double burden of falling revenues and a sluggish economy."

The federation said the decision ignored the realities facing small business owners. In its letter of objection, the group cited three core problems: the limited paying capacity of small business owners, the uniform application of the minimum wage without accounting for differences in paying capacity across industries, and a deterioration in job quality driven by a rise in very short-hour workers. The group said the Minimum Wage Act explicitly lists an employer's ability to pay as a criterion for setting the rate, yet the dire situation of small business owners had been entirely disregarded.

The federation noted that total outstanding loans held by the self-employed reached a record 1,092.9 trillion won at the end of last year, saying "the capacity 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, above the 8.64 percent average across all businesses.

The federation also raised concerns about the need for sector-differentiated minimum wage rates. 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 the system must be reformed to reflect differences in operating conditions across industries. The group also pointed to a rise in workers employed for fewer than 15 hours a week in recent years, warning that minimum wage increases could encourage businesses to cut operating hours, automate, or expand family-run operations.

Song said four in 10 small business owners earn an average monthly operating profit of less than 2 million won — meaning they cannot even take home the 2.24 million won monthly minimum wage equivalent. "A review of the minimum wage proposal is needed to protect the survival of small business owners on the brink and to prevent an employment crisis," he said.

The federation called on the government and the National Assembly to review the minimum wage, introduce sector-based differentiation, overhaul the minimum wage decision-making structure, and revive the job stability fund. It added that it "will mobilize every available means, including considering administrative litigation, to push for reform of the current minimum wage system."

Lee Mi-sun, KCTU vice chairwoman and worker representative, speaks at the 14th plenary session of the Minimum Wage Commission at Government Complex Sejong on July 14. [Yonhap]

Labor side also pushes back: 'Living costs still not covered'

The KCTU also held a press conference Monday morning in front of the Seoul Employment and Labor Office in Jung-gu, Seoul, and announced it was submitting its own letter of objection. The confederation said a 3.7 percent increase is not enough to offset the cumulative decline in real wages in recent years or to guarantee a living wage for low-income workers. The KCTU also said it was particularly troubled that this year's minimum wage deliberations failed to establish a separate minimum wage standard for piece-rate and performance-based workers such as delivery riders.

Opposition to next year's minimum wage has now spread to both sides of the labor-management divide. Employers are objecting over the burden of higher labor costs, while labor groups are protesting the low rate of increase and the failure to expand coverage — keeping the conflict over the minimum wage alive. However, observers note that even with the formal objection process available under the Minimum Wage Act, no review has ever been carried out since the system was introduced in 1988, making it unlikely that one will be conducted this time either.

boo@heraldcorp.com