7 out of 10 self-employed people are their own only employee

Posted on : 2017-07-23 11:53 KST Modified on : 2017-07-23 11:53 KST
Data suggests that the smallness of the operations is intensifying and business conditions are worsening
The number of small self-owned businesses is increasing due to the economic downturn
The number of small self-owned businesses is increasing due to the economic downturn

Over 70% of all self-employed South Koreans have no employees, a study shows.

The number of self-employed people with employees was also found to have increased in wholesale and retail sales, areas that are expected to suffer a heavy impact when the minimum wage goes up next year.

A report on trends and major characteristics of South Korea’s self-employed published by the National Assembly Budget Office (NABO) on July 21 calculated the number of self-employed people at 5.57 million, up by 170,000 in the first quarter of 2017 alone. At 21.4%, the proportion of the self-employed among all employed people was the fourth highest in the OECD, after Greece (30.8%), Mexico (26.7%), and Italy (23.3%; 2015 statistics). The rate is 6.6 percentage points higher than the 14.8% average for the OECD, and two to three times the rates in Germany (10.4%), Japan (8.5%), Norway (6.8%), and Luxembourg (6.1%).

Increase in number of self-employed people with no employees
Increase in number of self-employed people with no employees

The situation for self-employed people as measured by the presence of employees – which may be seen as an indicator of scale and feasibility – was not good. The number of owner-operators with zero employees stood at 4.01 million (72%) last year, up 28,000 from 2015. In contrast, 1.56 million (28%) hired at least one employee last year, down by 20,000 from the year before.

“This phenomenon of an increase in the number of self-employed persons with no employees and a decrease in the number with employees suggests that the smallness of the businesses is intensifying and business conditions are worsening,” NABO said.

But for wholesale and retail sales, which accounted for the largest portion of self-employed people last year at 1,217,000 (21.8%), the number of proprietors with employees increased by 13,000 while the number without dropped by 12,000.

“This phenomenon, which differs from the general trend for the self-employed, appears to be the result of more and more microbusiness proprietors in small-scale retail sales going out of business and being replaced by convenience stores,” NABO said.

The NABO analysis also showed declines in per capita sales and the rate of increase in sales for individual businesses. According to National Tax Service data, average sales for individual businesses totaled 143 million won (US$127,800) last year, a decrease of 1 million won (US$890) from the year before. The decline in sales was the first since 2013. The rate of increase in sales was –0.8%.

Worsening business conditions have also led to an increase in the number of individual firms going out of business, with 840,000 cases last year alone – an increase of around 100,000 from 2015.

Most of the people starting their own businesses last year were found to be seniors aged 60 and older. The number of self-employed persons over 60 increased by 47,000 last year, bringing their percentage among all self-employed to 26.8%, for a 0.8 percentage point rise from the year before.

“The recent increase in self-employed persons over 60 appears to be the result of elderly job-seekers leaving wage labor to start their own businesses after failing to secure a post-retirement income,” NABO said.

NABO went on to stress the “need to strengthen the social safety net for unemployment, including support for employment insurance premiums to self-employed microbusiness operators.” It also said potential proprietors “should be encouraged to enter promising industries at the pre-business establishment stage in order to relieve the concentration of self-employed persons in restaurants and wholesale and retail sales, where it is difficult to establish independent competitiveness.”

By Kim Nam-il, staff reporter

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