Eight out of 10 South Korean small and mid-sized enterprises next year will cut payrolls or won’t newly hire, and more than half also won’t invest due to worsening business conditions and increased labor cost from hike in the minimum wage.
In a survey by Maeil Business News on CEOs of 109 small and mid-sized companies, 33, or 30 percent, answered they will streamline labor force next year, while 53 percent planned to keep to the status quo. Only 17 percent planned increase in hiring.
Those mulling to streamline cited worsening business performance and increased labor cost from reduced legal work hour and base wage.
More than half, or 59 percent, does not plan new investment or business next year. About 10 percent has not been able to make any plans for next year. Another 14 percent mulls scale-down in business. Just 16 plans expansion.
Despite vows of promotion from the liberal government, the SME industry remained negative about business and economic prospects. Nearly half - or 46 percent - predicted business conditions to worsen next year with 11 percent seeing a sharp deterioration. Just 23 percent was optimistic about next year.
The biggest reason for their pessimism was the spike in minimum wage (37 percent), followed by reduced legal work hours (25 percent), and sluggish domestic demand (23 percent).
The minimum hourly pay next year goes up by 16.4 percent from this year’s level as part of President Moon Jae-in’s campaign promise to raise the legal wage base to 10,000 won during his five-year tenure.
By Lee Young-wook and Lee Ha-yeon
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]