Small Businesses Are Disappearing from Korea

  • By Hwang Ji-yoon

    January 25, 2023 08:32

    Small businesses are disappearing as a result of lockdown, higher labor costs and the rise of online commerce.
    According to Statistics Korea, there were 5.63 million self-employed workers last year, from noodleshop owners to graphic designers, to account for 20.5 percent of people in work. In 1963, when statistics began, self-employed workers made up 37 percent, but their number fell below 30 percent in 1989.
    Some 4.27 million employed no staff last year, the most since the global financial crisis in 2008 as lockdown and the steeply rising minimum wage squeezed them to breaking point.
    Kwon Soon-woo at a research center studying small businesses said, "We need to pay attention to the fact that since the late 2010s, the number of self-employed people with paid staff declined and more of them started running their businesses alone."
    Lockdown forced more and more self-employed workers into debt. According to the Bank of Korea, loans to self-employed workers rose from W700 trillion in the first quarter of 2020, when the coronavirus pandemic began, to W831.8 trillion in the first quarter of 2021, W961 trillion a year later and a staggering W1 quadrillion in the third quarter of last year (US$=W1,232).
    Used kitchen utensils pile up in storage in Ansan, Gyeonggi Province on Jan. 16. /Yonhap
    Some of the developments are natural consequences of economic development. Kim Kyung-hee at Statistics Korea said, "Advanced countries tend to have a higher proportion of salaried workers. Korea started developing from an agrarian economy, and its wholesale and retail industries grew to result in a large proportion of small-business owners. But this is gradually declining."
    The number of non-salaried workers in Korea stood at 6.59 million, or 23.45 percent of all workers, last year, the lowest on record. The number has been falling for the last 24 years and includes unpaid employees, who are usually the spouses or other relatives of the owner of a business. That put Korea in eighth place in the OECD in terms of the proportion of non-salaried workers with 23.9 percent in 2021.
    Countries with a bigger proportion are typically poorer, with Colombia at 53.1 percent, Brazil with 33.3 percent, Mexico with 31.8 percent, Greece with 31.8 percent, Turkey with 30.2 percent, Cost Rica with 27.4 percent and Chile with 24.8 percent. In the U.S. the proportion is only 6.6 percent and in Japan 9.8 percent.
    But the sharp decline here can also be seen as a warning sign that the ecosystem of small businesses is crumbling as both young jobseekers who opened their own stores amid a shortage of employment and retired people seeking to make ends meet have had to close their small business. The result could be that the economy loses vitality.
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