SEOUL (The Korea Herald/ANN) – The sluggish domestic economy and a spike in statutory minimum wage in South Korea in recent years have dealt a severe blow to the self-employed.
Most have been forced to close shop or have been saddled with huge debts amid cut-throat competition, but they are getting back on their feet by starting new microbusinesses, although not very successfully.
This reflects the tough job market here, as self-employment is still considered the most viable option for many people to make a living.
According to Statistics Korea, the number of self-employed people still posted 6.66 million as of November 2019, accounting for 23.4 per cent of the economically active population of 23.38 million.
Self-employment includes unpaid family workers as well as people who work for themselves, according to global labour standards.
Analysts said the percentage is high compared to major countries, pointing out that the high number of microbusinesses could be the main risk factor for the national economy when the economy stumbles.
As per the latest data released by the Organisation for Economic Cooperation and Development, among 38 major economies – 34 out of its 36 members plus four non-members: Costa Rica, Colombia, Brazil and Russia – Korea has a relatively high proportion of self-employed people.
The country recorded 25.1 per cent in the portion of self-employed people among the total employed as of 2018, marking the eighth-highest among these economies.
The figure far goes beyond the average (15.3 per cent) of the 28-member European Union (EU) and the average (14.7 per cent) of 19 eurozone countries for the corresponding year.
Most emerging economies posted figures lower than that of Korea. Poland (10th highest) recorded 20.3 per cent, trailed by the Czech Republic (12th) at 16.9 per cent, Slovenia (16th) at 15.2 per cent, Lithuania (26th) at 11.7 per cent, Latvia (27th) at 11.5 per cent, Hungary (28th) with 10.4 per cent and Russia (36th) at 6.7 per cent.
Among countries posting under 15 per cent were Finland (22nd) at 13.2 per cent, France (25th) with 11.7 per cent, Japan (29th) with 10.3 per cent, Germany (30th) with 9.9 per cent, Sweden (32nd) at 9.6 per cent, Canada (34th) with 8.3 per cent and Demark (35th) with 8.1 per cent.
The figures for the United States (US) (the lowest among the 38) and Norway (second lowest) stood at 6.3 per cent and 6.5 per cent, respectively.
Only seven recorded higher self-employed per centages than Korea. Those were Costa Rica, Chile, Mexico, Turkey, Brazil, Greece and Colombia.
Meanwhile, the financial difficulties of Korea’s microbusiness owners – in line with a higher burden of labor costs and weak consumer sentiments – is seen from the lending data of commercial banks.
Apart from the first-tier financial firms, a large portion of the self-employed were found to have borrowed from second-tier lenders.
The outstanding loans issued by commercial banks to the self-employed came to KRW313.8 trillion (USD267.7 billion) as of the end of 2018, up 8.7 per cent (or KRW25 trillion) from the previous year, Bank of Korea data showed.
The 2017-2018 comparison indicates that loans to the self-employed snowballed by KRW2 trillion a month on average throughout last year.