[Insight & Opinion] Revitalizing the Night-Time Economy Is Essential for Domestic Recovery

The economy can be divided into the daytime economy and the night-time economy. The night-time economy refers to all economic activities that take place during the evening and nighttime hours, typically from 6 p.m. until dawn the following day. Industries that are part of the night-time economy include restaurants, cafes, convenience stores, and movie theaters-most of which are service or self-employed businesses closely tied to domestic demand.

The Korean economy has a high proportion of service industries and self-employed businesses, and has traditionally relied heavily on nighttime consumption. However, recently, the night-time economy has contracted, deepening the domestic recession and increasing bankruptcies among self-employed business owners. By 7 p.m., most stores in downtown areas close, and the streets and public transportation become quiet. As the night-time economy shrinks and domestic demand slows, the growth rate is falling and consumer sentiment is deteriorating. In addition, the downturn in the service sector is leading to reduced employment opportunities for young people and women. To escape the low-growth trap and increase youth employment, it is urgent for policymakers to develop measures to revitalize the night-time economy.

First, there is a need to operate the 52-hour workweek system more flexibly. The contraction of the night-time economy is due to several factors: rising labor costs, changes in consumption patterns toward online shopping after the COVID-19 pandemic, and reduced disposable income as interest and tax burdens increase due to high interest rates and rising housing prices. However, the 52-hour workweek system is also a significant factor. This system, which regulates weekly working hours to a maximum of 52 (40 statutory hours plus up to 12 hours of overtime), has a major impact on the night-time economy. Running nighttime operations requires hiring additional shift workers, which leads to early closure of evening business hours to reduce labor costs. For consumers, reduced overtime means earlier end times at work, resulting in fewer nighttime gatherings. Since people no longer work late, they also do not consume late into the night.

To revive the night-time economy, it is necessary to expand the current weekly total working hours regulation for overtime to a monthly or quarterly basis and simplify the procedures, since statutory working hours are already operated flexibly. While maintaining the principle of the 52-hour workweek, a more flexible approach should be applied to the service sector to revive the night-time economy, prevent small business closures, and increase the growth rate. The United Kingdom, Australia, New York, and Japan are already implementing such measures.

It is also necessary to expand tax credits for nighttime labor costs for small business owners. Night work requires employers to pay a nighttime premium of more than 50%, which increases their cost burden. Policymakers should reduce this burden by expanding social insurance refunds and tax credits for nighttime labor costs.

Cultural tourism content policies to attract tourists are also important. Revitalizing the night-time economy is closely linked to attracting tourists. If night markets, nighttime performances, and other cultural content industries can operate regularly and grow, attracting tourists will help stimulate domestic demand. To achieve this, it is important to expand late-night transportation networks such as additional late-night buses and subways. Countries like Japan, Taiwan, and Thailand have boosted domestic demand by attracting tourists with such measures.

The most critical issues facing the Korean economy are the domestic recession and rising youth unemployment. Consumption, which makes up domestic demand, is closely linked to hours of economic activity. If people only consume during the day and not at night, total consumption time decreases, shrinking domestic demand. Reviving the night-time economy is essential to stimulate domestic demand, increase the growth rate, and support self-employed and small business owners. Activating the night-time economy is not about creating a new industry, but about increasing the operating rate of existing service industries, which can immediately boost the economic growth rate in the short term. Policymakers must pay attention to reviving the night-time economy.

Kim Jeongsik (Professor Emeritus, Department of Economics, Yonsei University)