SEOUL, July 16 (UPI) -- After Seoul decided to increase its minimum wage by more than 10 percent for next year, concerns are mounting among small businesses that the new wage will do more harm than good.
South Korean small business owners announced Monday they would veto the government's decision Saturday to increase the minimum wage from the current level of 7,530 won ($6.60) to 8,350 won ($7.40) per hour next year.
"Small businesses face a risk of closing due to the wage increase. The decision to further raise the minimum wage level will result in layoffs and accelerate polarization of the economy," said the Korea Federation of SMEs on Monday.
The Korea Federation of Small Business fears the wage hike will have an impact on small business owners and said it will come up with a flexible labor contract and wage level small businesses can use when hiring employees.
Convenience store owners demanded the government come up with measures to relieve their burden from the hike, such as lowering franchise loyalty fees and credit card fees, according to Herald Business.
South Korea's minimum wage has been on the rise under the Moon Jae-in government's plan to raise hourly pay to 10,000 won by 2020 to increase overall income for households. The current level was a 16 percent increase from last year.
"This year's minimum wage rise of 16.4 percent has already caused confusion among small businesses and further raising the wage level will push small businesses to the edge," the Korea Federation of SMEs said Monday.
Amid calls for support measures, Moon said he respects the new wage level set by the Minimum Wage Commission, which still falls short of his presidential pledge to meet the 10,000-won target.
"The decision reflects diverse opinions on the minimum wage increase and reflects complex reality involving varied interests and stakeholders," said Moon at a cabinet meeting Monday, Yonhap reported.
"The minimum wage hike aims to ... secure quality life for low-income employees, which will contribute to revitalizing the domestic economy, driving further growth and creating more jobs," he said.
According to OECD data, South Korea's self-employment rate is among the highest, at 24 percent among major industrialized countries in 2016. Japan's self-employment rate is 10.6 percent.
There were 110,726 small business owners in 2016 and only 39 percent are likely to survive after five years of starting their business, according to Statistics Korea.