The government decided Sunday to inject some 3 trillion won (US$2.6 billion) next year to relieve smaller businesses of financial burden from the effect of the increase in minimum wage.
A panel representing the government, labor and management agreed Saturday to raise the minimum hourly wage for 2018 to 7,530 won, up 16.4 percent from this year. It is the highest on-year increase after a 16.6 percent hike in 2000.
"The decision will be a huge momentum for an income-led growth, but it could put a heavy burden on small business owners," Finance Minister Kim Dong-yeon said during a meeting with economy-related ministers.
After the meeting, the government announced a set of measures to support the small enterprises, such as providing cash and expanding benefits to make up their increased wage costs.
The government plans to subsidize a certain size of companies with cash equivalent of an excess of 7.4 percent, which is the five-year average increase rate in minimum wage.
The government also said it will lower card fee rates for smaller businesses and expand such benefits to more businesses.
It will also lower the current 9 percent cap on increasing the deposit or rent for commercial properties. The period of tenants guaranteed a renewed contract under the same lease terms will be extended from the current five years to 10 years.
A task force will be formed to come up with detailed support plans to be reflected in next year's budget proposal, it said.
Earlier in the day, major corporate lobbies expressed concerns that the increase could worsen business conditions and hamper job creation.
"It was a decision that ignored small and mid-sized businesses which are already suffering from harsh economic conditions," an official at the Korea Employers Federation (KEF) said.
"The minimum wage hike doesn't really have a direct influence on big business groups, but such a rapid hike could be regarded a signal that the current administration is siding with the labor circle more than with the business community," an official working at a local conglomerate said.
While the decision was largely seen as a victory for the labor circle, local union organizations also expressed disappointment, saying the amount still falls short of their demand.
The labor circle first proposed 10,000 won, or a 54.6-percent hike on-year, while the management representatives suggested 6,625 won, a 2.4 percent increase. Their final proposals were modified to 7,530 won and 7,300 won, respectively, following government representatives' arbitration.
President Moon Jae-in has promised to increase the minimum wage to 10,000 won per hour before his five-year term ends in May 2022. (Yonhap News)