[Report] "Can't Endure If It Gets Worse" The Impact of COVID-19, Self-Employed in Distress

Number of Service Industry Employees Decreases by About 290,000... Largest Drop in 21 Years
Self-Employed Say "Minimizing Staff as They Don't Know When Business Will Improve"

On the afternoon of the 5th of last month, Goyang Jeil Market in Bucheon, Gyeonggi Province, showed a quiet scene due to the impact of the novel coronavirus infection. Photo by Im Juhyung, Asia Economy intern reporter skepped@asiae.co.kr

[Asia Economy reporters Seunggon Han and intern Juhyung Lim] As the novel coronavirus disease (COVID-19) crisis prolongs, it has been revealed that self-employed businesses such as lodging and restaurants have been severely impacted. With incomes sharply declining, more self-employed individuals are reducing their workforce or relying on loans to survive, raising concerns that a potential employment crisis could occur.

According to the Bank of Korea on the 8th, loans to small and medium-sized enterprises, including self-employed individuals and sole proprietors, increased by more than 8 trillion won last month, marking the largest increase since June 2009.

Among these, loans to sole proprietors increased by 3.8 trillion won, accounting for 47.5% of the total. In particular, if these businesses can no longer obtain loans and begin to go bankrupt or reduce their workforce, there is a possibility of an employment crisis.

According to the 'March Employment Trends' released by Statistics Korea on the 17th, the number of employed persons in the service sector decreased by 294,000 compared to the same month last year, marking the largest decline in over 21 years since September 1998 (-308,000) during the foreign exchange crisis. Employment decreased most notably in wholesale and retail trade (-168,000) and lodging and restaurants (-109,000), sectors with high self-employment rates.

Self-employed individuals unanimously stated that due to the impact of COVID-19, people simply do not come out of their homes, making it impossible to operate their businesses. As business becomes difficult, they inevitably resort to loans, creating a vicious cycle. With restaurants struggling, part-time workers are also being reduced, leaving some people losing their jobs.

Due to the spread of COVID-19, domestic business conditions darkened, and corporate and self-employed loans increased at the largest rate in 11 years last month. / Photo by Yonhap News

A in their 30s, who runs a sashimi restaurant in Hwagok-dong, Gangseo-gu, Seoul, said, "The end of February through March, when the fear of COVID-19 peaked, was the hardest time. Now, compared to the previous month, things are somewhat better," but added, "Because the past few weeks were so tough, even now, compared to last year, we are barely keeping the store open."

They continued, "Even if social distancing is slightly eased, the already dead consumer sentiment cannot suddenly revive," and lamented, "We don’t know when business conditions will improve, so we are working with the minimum number of staff."

B, who has been running a ssambap (wrapped rice) restaurant in Euljiro, Jung-gu for over 11 years, said, "Compared to last year, sales have clearly decreased," adding, "I don’t have savings, nor am I in a position to take out loans, so this is the limit. If sales get worse from here, I don’t think I can hold on."

Lee Mo (29), who works in the kitchen of a restaurant in Seoul, said, "Not only is business poor, but the labor intensity has also increased significantly compared to before," explaining, "Since there is no capacity to hire people, it is common for 2 to 3 people to do kitchen work that used to be done by five."

He added, "It’s physically exhausting to the point of strain, but right now, we are just grateful to have a job, so we can’t complain."

On February 24, when the possibility of community spread of the novel coronavirus (COVID-19) was increasing, Namdaemun in Seoul appeared deserted. / Photo by Yonhap News

Experts emphasized the need for prompt support for self-employed and daily workers who are in the blind spots of the social safety net.

Kim Yong-beom, First Vice Minister of Strategy and Finance, wrote on Facebook on the 18th, "The decrease in the number of employed persons occurred mainly among temporary daily workers and self-employed individuals who are outside the employment safety net, rather than among regular workers or quality jobs," diagnosing, "The COVID-19 crisis has revealed the vulnerable aspects of the labor market, and urgent emergency measures are necessary."

He added, "There is sufficient justification to significantly increase support for (temporary workers, daily workers, self-employed, etc.), and providing a minimum social safety net to those who have lost jobs due to economic shocks is a fundamental responsibility of the state."

He further stated, "Beyond the nature of emergency disaster relief, this can be seen as the state compensating for the opportunity costs of social quarantine; broadly speaking, this is also a quarantine cost," emphasizing, "If we do not help those asymmetrically affected for the public good of 'social distancing,' it will be difficult to sustain social distancing for a long time. Money is needed for lasting peace."

Meanwhile, the government is currently operating a 'super-low interest emergency loan package' worth about 12 trillion won to support the cash flow of small business owners affected by COVID-19. This amount consists of 2.7 trillion won in Small Enterprise and Market Service Fund loans for low-credit (credit rating 7 or below) small business owners, 5.8 trillion won in super-low interest loans from the Industrial Bank of Korea, and 3.5 trillion won in loans for high-credit borrowers (credit rating 1 to 3).

Additionally, the government plans to finalize and announce this week an 'Employment Stability Policy Response Package' that includes △ employment retention measures △ unemployment measures △ emergency job creation and new job creation measures △ livelihood stabilization measures for workers in blind spots.