Lee Jung-min, who runs a small business in Seoul, has been trying to figure out how to cope with the rise in labor costs expected for next year.
“We take home whatever we have left after paying all the expenses,” said the businessman in his 30s. “Every penny counts for people like us and it looks like things will get difficult next year.”
Lee isn’t the only self-employed person in Korea with serious concerns about making ends meet in the future.
According to data from the Bank of Korea, the consumer sentiment index in terms of expectations on domestic economic conditions stood at 79 for self-employed people for the month of July, whereas the index for people who earn a regular salary was 91.
The disparity between the two groups is the worst the central bank has seen since records began in 2008.
The index shows how positively or negatively people forecast the economic situation in Korea will be in six months time.
A figure below 100 indicates a pessimistic outlook that the economic situation will deteriorate.
The index plummeted for both groups – self-employed people from 90 and salaried employees from 100 in June.
Such figures show that while both self-employed people and wage earners are becoming more pessimistic about the economy, the former feels much less hopeful than the latter.
One reason why the self-employed have a gloomier outlook about their future is because of the rise in the minimum wage they must pay if they want to hire workers.
On July 14, the Minimum Wage Commission determined that next year’s base salary will go up by 10.9 percent to 8,350 won ($7.49).
A recent study by the Korea Federation of SMEs, which represents the country’s self-employed and small business owners, showed that 43 percent of the 300 small business owners surveyed responded that conditions will get very difficult when the minimum wage goes up, while 14 percent said they will be able to handle the hike.
“53.1 percent of the respondents said they will decrease their hiring,” the federation said in the study.nbb