Small business owners are strongly protesting next year’s minimum wage, which is to be raised by 10.9 percent, following a 16.4 percent hike this year.
The board of the Korea Federation of Micro Enterprise on Tuesday decided to form an alliance of small business owners and market vendors to stage sit-in protests against the 2019 minimum wage in central Seoul.
The board demanded a government road map to apply a separate minimum wage for small businesses that hire fewer than five workers. In Korea, a uniform minimum wage is applied to all businesses.
But the ruling party and the government have leveled an accusation at large companies and building owners, while maintaining nothing is wrong with the minimum wage hikes.
Democratic Party of Korea floor leader Rep. Hong Young-pyo said, “It is hard to understand criticisms that the minimum wage was raised without considering economic conditions or that the income-led growth policy has failed.”
The party’s leader, Rep. Choo Mi-ae said, “Small businesses are complaining over the minimum wage because it is difficult for them to be vocal against large companies and building owners.”
The ruling party blames the protests against the minimum wage on unfair trade with large companies and high rent demanded by building owners.
However, raising the minimum wage nearly 30 percent over two years is too much for small businesses to bear. They threaten to take to the streets because they face a dire situation. The focal point of their protests is the excessive rise of the minimum wage, not unfair trade with large companies and expensive rent.
Of course, unfair trade or power abuse by large companies is a problem, but that may be dealt with separately from the minimum wage. It is hard to understand why this must be linked to the side effects of the minimum wage hikes.
After raising the minimum wage sharply in spite of opposition from employers, the ruling party is pressuring large companies and building owners.
But it is wrong to depict the problem as a conflict between the haves and have-nots. Problems were caused by raising the minimum wage rapidly just because it was President Moon Jae-in’s campaign promise, even though small businesses were not prepared.
With fallacies in diagnosis, the prescriptions are inevitably beside the mark.
Fair Trade Commission Chairman Kim Sang-jo vowed to strengthen inspections on franchise headquarters to rectify unfair trade in a bid to ease the minimum wage burden on franchise store owners.
Kim said he would try to make large companies share the minimum wage burden with subcontractors. The FTC is also working on steps to lower franchise fees.
Minister of SMEs and Startups Hong Jong-haak said, “If small businesses request the minimum wage increment to be reflected in the prices of parts they supply, large companies must accommodate the demands actively.”
Financial authorities are considering ways to lower credit card transaction fees. In addition, the government is working with the ruling party to revise the law on rent for retail spaces.
However, average rent for small shops fell 2.3 percent year-on-year at the end of the first quarter. It is wrong to label landlords as plunderers of lease holders, as rent must be determined by demand and supply in the market.
Furthermore, card transaction fees were lowered in July last year. As the fees are directly related to the survival of card issuers, reducing them under pressure could cause another problem.
If the government intervenes in rent and fees to solve the side effects of minimum wage hikes, it will undermine the basis of a free market.
Pressuring companies and building owners is not a fundamental solution. It only causes discontent that the government is shifting the burden onto them. Government intervention will mess up market functions.
When it comes to the minimum wage, the administration under President Moon Jae-in has failed to put first things first, so side effects are inevitable.
The government must stop passing the buck and try to amend the minimum wage system.