Self-Employed Forced to Close Down
Number of Self-Employed Drops Below Pre-Pandemic Levels
Lower Than During the 1997 IMF Crisis
"Struggling with Delivery Fees and Soaring Prices"
The number of self-employed individuals has decreased by more than 200,000 over the past two months. As domestic demand remains frozen and shows little sign of recovery, self-employed people who could no longer endure declining sales have chosen to close their businesses instead.
According to Statistics Korea on the 10th, the number of self-employed people was recorded at 5.5 million in January. This is the lowest figure since January 2023, just before the endemic phase (when an infectious disease becomes a localized illness). Notably, it is even lower than the level during the 1997 IMF foreign exchange crisis.
Looking at the number of self-employed by year, it is lower than during the International Monetary Fund (IMF) foreign exchange crisis in 1997 (5.9 million), 1998 (5.61 million), and the global financial crisis in 2008 (6 million), 2009 (5.74 million). Since 2009, when the number dropped to the 5 million range, the self-employed population maintained around 5.6 to 5.7 million, but decreased to 5.5 million during the COVID-19 pandemic in 2020. After falling to 5.49 million in January 2023, just before the endemic phase, it had been recovering but sharply declined again at the end of last year.
The main reasons for the decrease in self-employed individuals are sluggish domestic demand and reduced consumption. Experts analyze that with reduced external consumption such as dining out, combined with persistent high inflation and high interest rates, it has become difficult for self-employed people to sustain their businesses.
Self-employed individuals also complain that their business burdens have increased due to rising prices while sales have not recovered to pre-COVID levels. According to a recent survey of 500 self-employed people conducted by Monoresearch on behalf of the Korea Economic Association, respondents said the biggest burdens were raw materials and ingredient costs (22.2%), labor costs (21.2%), rent (18.7%), and loan principal and interest repayments (14.2%). There is a high possibility that closures among self-employed businesses will continue this year. Among respondents, 61.2% answered that "sales prospects this year will decrease compared to last year."
Additionally, respondents reported that net profits decreased by 13.3% compared to the previous year. The proportion of those who said net profits decreased was 72.0%, while 28.0% said they increased. The proportions expecting net profits and sales to decline this year were 62.2% and 61.2%, respectively.
Statistics from the Ministry of SMEs and Startups also indicate difficulties faced by the self-employed. The average operating profit of small business enterprises in 2023 was 25 million KRW, down 19.4% (6 million KRW) from 31 million KRW the previous year. Meanwhile, debt increased by 5.4% (10 million KRW) to 195 million KRW from 185 million KRW the previous year.
Experts emphasize the need for employment policies to support those giving up self-employment. They stress that the continuous decline in self-employed individuals should be considered for its impact on the overall labor market. There are calls for urgent policy measures that go beyond simple startup support to help people recover after business closures.
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