More help promised for firms hit by wage hikes

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More help promised for firms hit by wage hikes


Ruling Democratic Party’s floor leader Hong Young-pyo, center, speaks during a meeting on Wednesday at the National Assembly where the party and government announced measures to help small business owners cope with a higher minimum wage. [YONHAP]

The Korean government Wednesday rolled out more measures to address the deteriorating employment situation, specifically targeting self-employed and small businesses, and committing as much as 7 trillion won ($6.2 billion) to help them be able to afford staff.

According to a plan announced by the ruling Democratic Party and the government, the total amount of government subsidies given to qualifying small businesses would be raised to 6 trillion won, double the amount the government spent this year.

The government will prioritize businesses with fewer than five workers for the subsidy.

There were about 5.7 million self-employed individuals in Korea as of June this year, accounting for 21.3 percent of the working population, a far larger ratio than in other economies such as the United States (6.4 percent) and Japan (10.6 percent).

This group normally pays their employees - mostly part-time workers - the minimum wage.

Many self-employed individuals have shut their stores or small businesses over the past couple of years and are looking for jobs. They were unable to cope with a 16.4-percent minimum wage that went into effect at the beginning of the year.

For such individuals, the government will provide 300,000 won in the form of monthly incomes for three months so they can look for a new job more comfortably.

The government has been promising measures to stabilize the Korean job market this week following devastating jobs data from July revealed by Statistics Korea last Friday.

The data showed that only 5,000 new jobs were created in July, the worst figure in nearly a decade.

On Tuesday, the government decided on policies aimed to help young workers or entrepreneurs during a cabinet meeting presided over by Prime Minister Lee Nak-yon.

The policies were actually the result of months of deliberation and on-site inspections by officials, the Finance Ministry explained.

Still, it’s debatable whether any of the measures will be able to quell the anger of small business owners in Korea. Those who have survived will have to face another hike in the minimum wage next year by 10.9 percent to 8,350 won.

“These measures will not be sufficient to turn around the sentiment of the self-employed,” said the Korea Federation of Micro Enterprises, which represents self-employed Koreans, in a statement Wednesday.

“Problems caused by the minimum wage hike must be resolved by improving the minimum wage policy itself, and the measures announced today failed to present a clear roadmap on how the government will actually address this very concern.”

The federation and other organizations that represent small businesses and entrepreneurs have been demanding that the government apply different minimum wage standards depending on the size and characteristics of businesses.

Economic experts also criticized the ameliorative measures, saying that they are only temporary and that throwing government money at the problem not the solution.

But Hong Young-pyo, floor leader of the ruling party, said the difficulties that small businesses are facing today stem from other factors such as rising rents and credit card fees charged by large card companies.

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