As labor groups push for a 14.7 percent increase in South Korea’s minimum wage to 11,500 won ($8.43) in 2026, nearly two-thirds of small businesses say the wage should be frozen or even reduced, according to a new survey that was released on Sunday.

The Korea Federation of SMEs (KBIZ) found that 72.6 percent of small firms believe the 2025 minimum wage is already a financial burden, while 66 percent support either freezing or lowering the rate for 2026. Among the respondents, 22.2 percent said the minimum wage should be cut, a sharp increase from 2.8 percent a year ago.

The survey, conducted via telephone from May 19th to 30th, 2025, included responses from 1,170 small and medium-sized enterprises (SMEs). The results reflect growing concern among smaller companies and self-employed business owners who are increasingly strained by sluggish domestic demand and a worsening business environment. Nearly 64.1 percent of businesses said their performance had deteriorated compared to 2024.

Among firms with annual sales under 1 billion won, 75.3 percent favored freezing or cutting the minimum wage, and the same trend was evident among businesses with fewer than 10 employees. Key labor cost pressures included the minimum wage itself (54 percent), followed by rising social insurance premiums (37.6 percent) and labor shortages (29.7 percent).

If the minimum wage is raised beyond manageable levels, 45.8 percent of SMEs said they would respond by reducing existing staff or limiting new hires. Specifically, 23.2 percent said they would cut current employees - a significant rise from 2024’s 6.8 percent figure.

When asked which reforms are most urgently needed, 33.2 percent of respondents pointed to differential application of the minimum wage for vulnerable sectors. Another 31.8 percent said the current annual decision cycle should be extended to two years or more.

Smaller firms were more likely to support such reforms: among companies with annual revenue below 1 billion won, 38.8 percent supported industry-specific application, while 37.2 percent of businesses with one to nine employees backed it as well.

Lee Myung-ro, head of human resources policy at KBIZ, said, “With the 2025 economic outlook down to near-zero growth, businesses - and SMEs and self-employed operators in particular - are increasingly saying that it is nearly impossible to survive under the current conditions.” He added that freezing the minimum wage or minimizing increases, along with allowing for industry-specific differentiation, would help ensure the system’s sustainability.

[ⓒ 매일경제 & mk.co.kr, 무단 전재, 재배포 및 AI학습 이용 금지]