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44% of Self-Employed Households in Poverty Level

Posted November. 28, 2004 23:00,   


According to data from the Korea Labor Institute (KLI) acquired by Dong-A Ilbo, among 1,506 sampled self-employed people by last year’s standard of families of four, 44.36 percent (660 people), nearly half, were earning less than the monthly minimum amount for living expenses (1.01 million won).

The Excess Supply of Livelihood-Style Self-Employment-

Of last year’s employed population of 22.139 million, 34.9 percent, or 7.736 million, were self-employed, the highest percentage among the Organization for Economic Cooperation and Development (OECD) members.

This is two to five times the percentage of Germany (11.1 percent), the United Kingdom (11.7 percent), Sweden (9.8 percent), Japan (16.3 percent) and the U.S. (7.2 percent), and even higher than Taiwan (28.4 percent), whose economic scale is similar to Korea’s.

Usually, as the national income increases, the percentage of self-employed among the employed population decreases, but contrary to this, Korea’s percentage is increasing.

The Misjudgment of the Government-

As an aspect of the unemployment solution, the government put forward the method of supporting “livelihood-type business establishments”, and has aggravated the situation. From 1999 to this October, the amount the government has spent to support this method has reached one trillion, 898 billion won.

Due to the self-employment business establishment boom and the economic recovery, the unemployment rate dropped from the 1998 level of seven percent and the 1999 level of 6.4 percent to 4.2 percent in 2000 and 3.8 percent in 2001. However as the means to create proper job positions and return laid off workers to the regular labor market are barred, the rapid increase in the number of self-employed is an important factor causing the illusion of a decrease in the statistical unemployment rate.

Dr. Ahn Joo-yeop, a researcher for KLI, pointed out, “The policy of supporting business establishments, which was the actual solution to unemployment, was carried out with insufficient understanding of self-employment.”

Self-Employment Without Sufficient Infrastructure-

In developed countries such as the U.S., France and Japan, owners of self-employed businesses have preparation time of at least five years before they open their businesses. Also, most of them are career business establishments, which are businesses related to their long-pursued careers. Examples like those of Korea, where office workers or bankers suddenly open restaurants, flower shops and motels, are scarce.

Social infrastructures aiding the establishment of self-employed businesses are weak. There are only 60 small business development centers, which help business establishments, while the U.S. and Japan have over a thousand.

The low quality of business establishment consulting is another problem. Many of those working in Korea’s small business development centers are ex-government officials or ex-bankers who have no experience with self-employment. In contrast, in developed countries, people with long-time field experience in being self-employed are guiding self-employment. Geum Jae-ho, director of the KLI Labor Insurance Research Institute, indicated, “Most of the self-employed degrade to people with bad credit ratings or urban paupers, and this self-employment rage is a commotion that is fast becoming a social problem,” and that “a comprehensive solution and the conversion of the perception of the people is needed.”

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