Convenience stores at fore of wage raise fight
What keeps him up at night is how President Moon Jae-in’s plan to raise the minimum wage to 10,000 won ($8.90) by 2020 might affect his bottom line.
Park retired five years ago and opened up his corner shop with 180 million won that he and his wife had saved up. He works at the store for about five hours every weekday morning and hands over the rest of the time to five part-time workers who rotate on eight-hour shifts.
The convenience store is a franchise, so he pays about 35 percent of sales to the licensing company. After covering rent and wages for his part-timers, Park says he takes home about 3 million won each month.
But under Moon’s proposed minimum wage increase, his profit could decrease by about 860,000 won a month, and that’s based on the assumption that sales at his store will rise by an average 5 percent a year through 2020, according to an analysis of Park’s balance sheet run by the JoongAng Ilbo. Park would have to work more hours to save on labor costs, but he says he can’t due to knee problems.
“In the past three years, sales at my store only rose about 2 percent a year and I expect the fall in profit from this business will worsen from now on,” Park said. “I think I might lose all my investment.”
One of President Moon’s campaign pledges was to raise the hourly minimum wage from the current 6,470 won to 10,000 won in the next three years, and while the initiative is meant to prop up low-income earners, various studies have shown that small business owners could bear the brunt of the raise.
According to research by Hana Financial Investment, department store profit is expected to fall 3.2 percent, profit at large discount chains by 10.3 percent and convenience stores 9 percent if the minimum wage goes up to 10,000 won.
Franchised convenience stores will likely be hurt most by the policy because individual owners have to pay licensing fees on top of labor costs. Out of 11,454 CU convenience stores across the country, only 100 of them are directly managed by the franchisor, and out of 11,422 GS25 stores, only 137 are directly managed. The rest are run by individuals like Park.
It’s not just business owners who balk at a higher minimum wage. The Minimum Wage Commission, a public institution that works with both labor and management groups, found that workers also believe a 10,000 won minimum wage is too high. The commission surveyed managers at small and midsize firms, workers and part-time workers between April and May last year.
“If the minimum wage goes up to 10,000 won, I will start considering whether it is better to be an owner or worker,” said one convenience store owner. “I will earn less than what my part-time worker gets. Currently, the store makes 4 million won a month, and I have to spend 3 million won on wages for part-time workers.”
Some business groups worry that the policy could reduce the number of available part-time jobs. There are more than 35,000 convenience stores across the country, and if each one cuts back on one part-time worker, 35,000 jobs will disappear, according to the Korea Association of Convenience Store Industry. Each convenience store has about five to six part-time employees, totaling around 180,000 part-timers.
“Jobs at convenience stores and internet cafes are thought of as relatively easy ones,” said a part-time worker at a convenience store. “I think owners of convenience stores might feel it’s unfair if the government mandates them to pay the same wage to their part-time workers as those who work harder jobs in manufacturing.”
BY CHOI HYUN-JOO [email@example.com]