[2020 Nightmare of Self-Employment] Tears and Closures Every Other House... Already 70,000 People Have Packed Up

76,000 Decrease in Self-Employed by November This Year
Self-Employment Ratio Falls Below 10% for the First Time
50,000 Stores at Risk of Closure Next Year

With the resurgence of COVID-19, government quarantine measures have been strengthened, and citizens' consumption activities have even contracted, intensifying the hardships faced by self-employed business owners. The Myeongdong street in Jung-gu, Seoul, known for its concentration of restaurants and various shops, is showing a quiet scene. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Lee Seon-ae] "It's not like I fled in the middle of the night to escape debt, but I never imagined COVID-19 would ruin everything in an instant..." Kim Mo (46), who has been running a Dakgalbi restaurant near Jonggak Station for 11 years, swallowed dryly as he looked at the empty shops across the alley. His restaurant, which used to have no seats available at the end of the year, had only two customer groups just seven hours after opening. The area near Jonggak Station, a representative commercial district in Seoul, showed no signs of its former vitality. There were only a few restaurants and shops open, and there were more store owners than pedestrians on the street. Not only large restaurants but also cooking academies that had been there for decades closed down and even removed their interior fixtures. The once bustling travel agency alley was littered with travel brochures on the ground. Even the merchants' resolve to overcome COVID-19 earlier this year had collapsed, leaving only "temporary closure" signs everywhere.

On the 28th, as the damage to self-employed businesses continues due to COVID-19, the proportion of self-employed workers relative to total employed persons is expected to fall into the 10% range for the first time in history. According to Statistics Korea, the total number of employed persons from January to November this year decreased by about 180,000 compared to the previous year. Among them, the decrease in self-employed persons is significant, dropping by 76,000, which accounts for about 42%. The proportion of self-employed workers, which recorded a historic high of 30% in the 1980s, decreased to 21.3% in 2017. Last year, the proportion was 20%, but it is expected to drop to 19% this year due to the COVID-19 crisis.

There is also a forecast that the number of self-employed households facing closure could exceed 50,000 next year. According to the Bank of Korea's recently released "2020 Second Half Financial Stability Report," among the approximately 2,437,000 domestic self-employed households (households with heads who are self-employed) last year, those experiencing a "liquidity crisis" accounted for 2.3% in February this year but are estimated to have risen to 7.5% this month. The Bank of Korea projected that when the government's and financial sector's repayment deferral measures for small business owners expire in March next year, this rate could soar to 10.4% (about 253,400 households) by the end of next year. The proportion of self-employed households effectively bankrupt, unable to repay debts even after selling all assets, was 0.4% of the total in February this year but is estimated to rise to 2.2% (about 53,600 households) by the end of next year.

With startups decreasing and closures increasing, the vacancy rate of commercial properties is also surging. According to the Korea Real Estate Board, the vacancy rate for medium to large commercial properties in the third quarter of this year was 12.4%, up 10.9 percentage points from 11.5% in the third quarter of 2019, marking the highest level since 2013. The vacancy rate for small-scale commercial properties in the third quarter was 6.5%, up 0.6 percentage points from the previous year, also the highest since 2015. According to data from the Small Enterprise and Market Service registered on the Public Data Portal of the Ministry of the Interior and Safety, the number of commercial properties in Seoul was counted at 367,535 as of the third quarter (September 30) this year. Considering that there were 391,499 in the first quarter and 370,321 in the second quarter, it appears that about 24,000 places have closed down in Seoul alone.