Labor reform propped up by aid for SMEs

A government task force to assist small businesses affected by a reduction in work hours and higher minimum wage convened on Wednesday.

Vice Finance Minister Ko Hyoung-kwon, who is leading the task force, said in a news conference after the first meeting that small and medium-sized companies have applied for government support in overwhelming numbers. The financial aid is meant to offset a record minimum wage increase that went into effect at the beginning of the year.

Ko said the aid is expected to reach a million workers at small and medium-sized enterprises across the country. “This is significant in the sense that improvement in income and social safety net has been strengthened with more than a million low-income workers able to secure job stability and other benefits including social insurance,” the vice minister said.

Most of the business owners who applied for the aid have less than 10 employees. President Moon Jae-in’s government has set aside three trillion won ($2.8 billion) to support businesses with less than 30 employees after it raised the minimum wage by more than 16 percent at the beginning of the year. Each worker can get as much as 130,000 won through the government program. Cleaning and apartment security contractors are exempt from the 30-employee limit.

Ko said the government expects more positive changes in the workplace after the National Assembly passed a bill on Feb. 28 to shorten the number of work hours in a week from 68 to 52. Korea ranks second in the OECD when it comes to time spent at work, with the annual per-capita figure as of 2014 at 2,124 hours, slightly behind Mexico’s 2,228 and well above the OECD average of 1,770.

“[The shortened work hours] will not only bring about better work-life balance but also lead to sharing jobs,” Ko said. “More hiring opportunities and more leisure time will have a positive effect on vitalizing the domestic economy, raise productivity at companies and likely result in improving the country’s birthrate.”

The vice minister acknowledged the concerns that some small and medium-sized enterprises, especially manufacturers, have raised about the reduction in work hours.

“Some companies will face the burden of having to hire more people and find applicants, and some workers could see their wages shrink [due to the shorter work days],” Ko said. “Related government departments will review the impact [of the new regulations] and come up with measures to minimize the [negative impact of] shorter hours.”

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]