South Korea's new president draws ire of small businesses he's vowed to help
QUESTIONABLE
OPTIMISM
SEOUL (Reuters) - Small businesses in South Korea fear their
profits could be cut to the bone and some could be forced to close if the
country’s new president pushes ahead with plans to raise minimum wages,
restrict contract staff numbers and reduce working hours.
Since his election earlier this month, President Moon Jae-in has
made boosting job prospects for young South Koreans a signature policy, while
also protecting workers’ rights.
With that in mind, he has also targeted reform of South Korea’s
giant family-run conglomerates, or chaebol, to make them less dominant and help
smaller firms become engines of growth in Asia’s fourth-largest economy.
Just last week, Moon’s nominee to head the country’s anti-trust
regulator noted that South Korea’s ten largest conglomerates - including
household names like Samsung and Hyundai Motor Group - employ only 1 million of
South Korea’s 19 million actively employed workforce.
“The ultimate goal of chaebol reform is to protect small
companies and self-employed business owners so they can create many more new
jobs,” said Kim Sang-jo, the president’s choice to head the Korea Fair Trade
Commission.
But many businessmen fear that instead of generating jobs,
smaller businesses will be crippled by the higher cost of hiring and paying
workers if Moon’s labor reforms are implemented.
Take for
example, Sam Heung Heat Treatment, a company employing around 50 workers at a
factory supplying components to automakers like Hyundai (005380.KS) and General Motors Co (GM.N).
Chairman Joo Bo-won told Reuters his firm could fold because of
policies he says would both double the wage bill and double the number of full
time workers needed to make up for the shorter working week.
Asked what would happen if Moon’s proposals became law, Joo gave a stark
response.
“It’s simple: you can just shut down the factory,” he said.
QUESTIONABLE
OPTIMISM
Moon has pledged to raise the minimum wage by 55 percent to
10,000 won ($8.94) per hour by the end of his five-year term.
At the same time, he wants to lower the maximum working week to
52 hours, bringing it down from the current cap of 68 hours, in a move that he
says would help create 500,000 private sector jobs.
Small businessmen, however, say Moon has got it wrong, and there will be
less work as profit margins suffer.
Kim Moon-sik, the president of an association of gasoline filling station
owners, is a member of the labor ministry’s key minimum wage committee.
He warned that the proposals, as they stand, would backfire if they are
applied to firms regardless of size.
Kim said filling stations’ profit margins average less than 0.5 percent,
and if the hourly pay rate is increased so sharply it would probably force
owners to run their businesses for shorter hours each day.
“Instead of creating jobs, the changes could make it harder to maintain the
jobs that exist now,” said Kim, president of the Korea Oil Station Association.
To try to coax the private sector to hire more, Moon has pledged the
government will pay for the salary of every third youth employee hired by small
companies for three years.
But a spokesman for Arbeit Workers Union, representing some 1,000 part-time
employees at convenience stores and fast food outlets, like the local McDonalds
unit, said the government needs to do more to help small businesses so that
they can afford to pay more.
“We understand that it would be illogical to ask businesses to pay higher
wages when they have no ability to pay,” Choi Gi-won, the union spokesman,
said. “But the minimum wage has to be raised.”
