South Korea’s small and medium-sized enterprises are finding it increasingly difficult to hire foreign workers amid rising minimum wages and a prolonged economic downturn, a survey by a local business federation showed Sunday.

According to the Korea Federation of Small and Medium Business, or KBIZ, a majority of companies that opted not to hire foreign nationals this year cited a deteriorating business environment as their main concern.

The latest survey was conducted from Monday to Wednesday last week and targeted the 577 SMEs that did not report employing any foreign nationals with E-9 visas so far this year, despite having employed E-9 workers in 2017.

Of all respondents, 62.4 percent cited changes in the business environment, such as the increased burden of personnel expenses and the weaker economy, as reasons for their reluctance to hire foreign workers. 

Starting in January 2018, the country’s legal minimum wage rose 16.4 percent on-year to 7,530 won ($6.2) per hour, from the previous 6,470 won. The change took place as part of the government’s midterm vision to pull up the base wage to 10,000 won or more by 2020.

Also, 14.7 percent answered that they had reached their employment quotas, while 6.2 percent said they had had complaints about past foreign workers. Some employers provided detailed examples such as communication barriers, low productivity, frequent job changes and administrative issues related to lodging and insurance.

When asked about future employment plans, only 40.4 percent of the respondent companies said they planned to reinforce their staff numbers next year, regardless of workers’ nationality.

“Up until last year, demand existed for foreign workers, especially from firms that could not find sufficient workforce (numbers) in the domestic market, but a lot has changed this year due to the minimum wage hike and other economic uncertainties,” said an official of KBIZ.

“(The government) needs to modify related employment policies, focusing on improving the business environment for SMEs.”

By Bae Hyun-jung (tellme@heraldcorp.com)