South Korea Gov't Will Support Small Businesses

Bruno Cirelli
Luglio 18, 2017

Starting next year, Korean workers would be paid 1,573,770 won for their monthly labor when working for 209 hours, 221,540 won greater than now. To minimize the side effects, the government plans to spend more than 4 trillion won including 3 trillion won to subsidize small employers over the next five years in their pay beyond the 7.4 percent average in minimum wage increases in recent years.

"The decision will be a huge momentum for an income-led growth, but it could put a heavy burden on small business owners", Finance Minister Kim Dong-yeon said during a meeting with economy-related ministers.

It will also lower the current 9% cap on increasing the deposit or rent for commercial properties.

A task force will be formed to come up with detailed support plans to be reflected in next year's budget proposal, it said.

The government on Saturday approved a record 16.4 percent hike in the minimum wage next year or an increase of W1,060 to W7,530 (US$1=W1,136).

The Small and Medium Business Administration in a statement following the decision said, "Small and mid-sized businesses and other private traders will have to shoulder an additional W15.2 trillion in labor costs next year, so they will have to either reduce staff or close their operations".

While the decision was largely seen as a victory for the labor circle, local union organizations also expressed disappointment, saying the amount still falls short of their demand.

The labor circle first proposed 10,000 won, or a 54.6-percent hike on-year, while the management representatives suggested 6,625 won, a 2.4 percent increase.

In a meeting with his senior secretaries at the presidential office on Monday, Moon said it is a positive signal for achieving his pledge to eventually raise the minimum wage to ten-thousand won.

Among the raft of policy items is the creation of a new body to investigate corruption and influence-peddling of high-level officials and their families, such as prosecutors, judges, generals and lawmakers.

"For [South] Korea, where the social welfare system is weak, workers are more dependent on income and a higher minimum wage is important from a human rights perspective", said Seoul-based Konkuk University economics professor Choi Pae-kun, who supports the 10,000 won target.

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