[Opinion] Breaking the Vicious Cycle of Self-Employed Displacement Through Corporate Job Creation

Choi Jun-seon, Honorary Professor at Sungkyunkwan University School of Law

Although politics in Korea is considered underdeveloped, its economy is close to that of advanced countries, making the excessively high proportion of self-employed individuals a mystery. Korea is known as a 'Republic of the Self-Employed.' One in four employed people is self-employed, more than twice the average of the Group of Seven (G7) countries. According to statistics from the Organisation for Economic Co-operation and Development (OECD) as of January 24 this year, the self-employment rate in Korea was 24.6% in 2019. The G7 average is 12%. The rates for the US, Canada, Germany, Japan, France, and the UK are 6.1%, 8.2%, 9.6%, 10%, 12.1%, and 15.6%, respectively.

There are various ways to analyze this, but research in Europe shows that countries with less corporate democratization tend to have higher proportions of self-employment. Here, 'corporate democratization' does not refer to the issue of chaebol group governance but rather to a horizontal corporate culture within the workplace. In companies with strong hierarchical, vertical, and coercive corporate cultures, individuals with strong personalities often cannot adapt, resign, and turn to self-employment.

Labor market rigidity is also cited as a cause. While it is difficult to be fired, once someone loses their job, it is almost impossible to find reemployment under the same or better conditions, leading involuntary unemployed individuals to become self-employed out of necessity.

Another cause is the end of the era when companies would hire and train any college graduate regardless of their major. Nowadays, companies hire a small number of already trained experts as needed. Job seekers must register their resumes on the recruiting sites of desired companies and wait indefinitely while continuously updating their relevant experience until contacted.

It has become very difficult to enter a good workplace these days. Even before the COVID-19 pandemic struck, the Korean economy was already in a severe underlying condition due to various regulations. Under the banner of income-led growth, rising minimum wages, the 52-hour workweek, the conversion of irregular workers to regular status, and the inability to dismiss low performers made new hiring difficult. Recently, the situation has worsened due to the enactment of the three corporate regulation laws, amendments to labor-related laws, and the Serious Accidents Punishment Act.

The result of all this has been an increase in the number of self-employed individuals. This is clearly seen in the employment trends of the self-employed. According to the Statistics Korea Economically Active Population Survey, although the total number of self-employed decreased significantly over the four years from 2017 to 2020, 85,000 new self-employed without employees started businesses, while 236,000 self-employed with employees closed theirs. It is difficult to run a self-employed business, and even if they do, they are afraid to hire employees and operate small family-run shops instead.

There is only one solution for the self-employed issue: reducing the number of self-employed individuals. Regulations must be eased so that companies can provide large-scale, quality jobs. For example, complex shopping malls traditionally have high employment rates, but mandatory holiday policies and online business restrictions are currently hindering employment. Few people choose self-employment out of preference.

The 'COVID-19 Coexistence Solidarity Three Laws' are likely to become the 'COVID-19 Coexistence Coercion Three Laws.' Instead of creating illogical 'three-law series' under the guise of self-employed measures to twist the arms of companies, we should encourage and reward companies that generate profits, pay taxes, and provide jobs even amid the pandemic, boosting their morale. There is no shortcut.

[Choi Junsun, Honorary Professor, School of Law, Sungkyunkwan University]