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Shifting the blame

July 18,2018
The Moon Jae-in administration has found a breakthrough in dealing with the shocks from its relentless push for a higher minimum wage. In a press conference Monday, Fair Trade Commission Chairman Kim Sang-jo said he will reinforce investigations of major franchise chains’ unfair practices with their franchisees to ameliorate the rapid increases in the minimum wage. “We have started looking into six franchises for restaurants and convenience stores,” he said. The commission also plans to lower franchise fees for franchisees.

That’s not all. In a meeting with heads of small and medium-sized enterprises (SMEs) on Monday, Hong Jong-hak, minister for SMEs and Startups, stressed that large companies must accept their suppliers’ demands to reflect their minimum wage increases in fixing prices of their supplies and services. On top of that, financial institutions are under pressure to consider the idea of cutting commissions charged on vendors for credit card purchases.

If franchisers exploit their franchisees, the commission must correct it. But the institution has put the cart before the horse. Chairman Kim said his commission will investigate unfair practices by franchisers in order to ease franchisees’ financial burdens from the wage hike. But fixing franchisers’ bad practices should come before easing their financial difficulties. Due to the reversed order, criticisms are mounting over the government shifting the responsibility for unaffordable wage increases to large companies.

Let’s face it. The average operating profit margin for four major convenience store chains, including CU, GS25 and Seven Eleven, stood at a mere 2.9 percent last year. That’s less than half the average operating profit margin of 7.4 percent for the entire industry. If the commission lowers franchisees’ deposits, it only helps franchisers raise prices of the products they supply.

The same trouble occurs when the government pressures credit card companies to lower their commissions on vendors. KB Kookmin and Shinhan Card companies already received applications for early retirement from their employees. If they have to lower their commission fees, they have no other choice but to cut customers’ benefits for a new card or raise interest rates for loans they offer.

The government is shifting the responsibility to companies. That cannot be a solution. It must take responsibility for the mess by fixing all the problems with the wage hike as soon as possible.

JoongAng Ilbo, July 18, Page 30