'I can't afford another worker': Minimum wage hike renews calls for reform
Korea’s 3.7 percent minimum wage increase, set for next year, is intensifying pressure from small businesses to revamp the system for deciding the baseline level.
An employee organizes cups of takeout coffee in a cafe in Seoul on Dec. 18, 2025.NEWS1
Korea's decision to raise the minimum wage by 3.7 percent next year has renewed calls to overhaul the country's wage-setting system, as small business owners say they are struggling to absorb rising labor costs.
For Cho Sang-hyeon, a cafe owner in Uijeongbu, Gyeonggi, the burden has meant working alone for the past six years. The cafe owner has spent 11 hours a day, seven days a week, taking orders and making coffee by himself since letting go of three part-time employees in 2020, when the Covid-19 pandemic caused sales to plunge and labor costs became too difficult to afford.
“The prolonged economic downturn has forced many nearby businesses to close, and the commercial district has lost much of its vitality,” Cho said. “Some days, my sales don't even reach 100,000 won [$67.23]. The minimum wage goes up every year, and hiring even one part-time worker would have a big impact on my business. I have no choice but to run the cafe by myself.”
The Minimum Wage Commission, under the Ministry of Employment and Labor, finalized next year's minimum wage at 10,700 won an hour, up 380 won, or 3.7 percent, from this year's 10,320 won.
The decision drew criticism from small business owners and business groups.
In a statement released on Wednesday, the Korea Federation of Micro Enterprise said it was “deeply disappointed” by a decision that ignored the desperate appeals of 7.9 million small business owners struggling with record levels of debt and a sluggish economy.
Cafe owner Cho Sang-hyeon works at his store in Uijeongbu, Gyeonggi, on July 15.JOONGANG ILBO
The federation called on the government and the National Assembly to introduce a series of reforms, including setting the minimum wage every other year instead of annually, allowing different minimum wages by industry and strengthening the representation of small business owners during minimum wage deliberations.
“Excessive labor costs would force small businesses and microenterprises to cut jobs or shut down,” it said. “[The government] needs to introduce industry-specific minimum wages and reform the system to better reflect employers' ability to pay.”
The Federation of Korean Industries likewise called for a reform on the minimum wage policy.
“Industry-specific policies [for minimum wage] should be institutionalized,” the federation said. “The policy should ensure employers' ability to pay and productivity are given sufficient consideration when determining the minimum wage.”
Although the minimum wage will rise by 3.7 percent, many business owners say the actual increase in labor costs exceeds 20 percent.
Employers must also pay a weekly holiday allowance to employees who work at least 15 hours a week. Including the allowance, the effective hourly wage rises to 12,840 won while the monthly labor cost reaches about 2.24 million won
A survey conducted by the Korea Federation of Micro Enterprise in May found that 87 percent of 700 small business owners said they already considered the current minimum wage “burdensome.”
“I reduced my staff by two-thirds this year because of labor costs,” Lee Jae-hoon, who runs a Korean food restaurant in Mapo District, western Seoul, said. “When the minimum wage rises, related labor costs such as employment insurance premiums and severance pay also increase.”
The 13th plenary meeting of the Minimum Wage Commission is seen taking place at the Sejong Government Complex in the central administrative city on July 9.YONHAP
The higher minimum wage will also increase a range of government benefits linked to it, such as weekly holiday allowance, unemployment benefits and maternity leave benefits.
A total of 27 laws use the minimum wage as a benchmark. The weekly holiday allowance, for instance, is calculated based on a five-day workweek and an eight-hour workday, and will increase from 82,560 won this year to 85,600 won next year.
The increase is expected to add to the burden on self-employed business owners in labor-intensive industries such as restaurants, accommodations and retail.
The minimum daily unemployment benefit, based on an eight-hour workday, will also increase from 66,048 won to 68,480 won. That would exceed the current maximum daily unemployment benefit of 68,100 won, creating an unusual situation in which the minimum benefit is higher than the maximum.
Experts say the current minimum wage-setting system itself needs reform.
The Minimum Wage Commission is made up of 27 members — nine representing labor, nine representing employers and nine public-interest members recommended by the government.
Because labor and management rarely reach an agreement, public-interest members effectively determine the final outcome through a vote. Critics have long argued that the minimum wage is therefore influenced by the political orientation of the administration in power.
By contrast, countries such as France, Germany and Britain rely on expert panels of fewer than 10 members that consider factors including employment, inflation and productivity when determining minimum wages.
“We need objective criteria that comprehensively reflect industry characteristics, employers' ability to pay and inflation,” said Kwon Sang-jib, a professor at Hansung University. “It would be desirable to reform the system into a more predictable minimum wage-setting process.”
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
