[Editorial] Self-Employed Needs Immediate Help

The number of small business owners and the self-employed was 5.945 million in the first half of the year, 70,000 fewer year-on-year. The figure also fell below six million for the first since 2003, when mass credit card delinquencies dampened the domestic economy. The self-employed also lost customers to e-commerce, large retail stores and at-home shopping. In the first half alone, 23,000 restaurants went out of business.

Those who survived are barely managing to get by. The monthly household income of non-wage earners, mostly consisting of the self-employed, was 2.78 million won in the first quarter, far below 3.99 million won earned by urban wage-earners every month. According to a study on the self-employed in seven major cities by the Korea Chamber of Commerce and Industry, the self-employed in the first half saw sales drop 18 percent and revenue fall 30 percent year-on-year. Another survey by the Small and Medium Business Administration also said sales of the self-employed declined 29 percent from three months ago.

The proportion of the self-employed among the employed is 26.5 percent, more than double the average of advanced nations (10 percent). Many small business owners and the self-employed are reluctant to commercialize new products and 80 percent of them were forced to start a business because they had no other options in the job market. Sixty-four percent began their business without experience. Though one or two years of preparation are needed for a successful business, most restaurant and shop owners face bankruptcy after just six months of preparation.

Worse, the government provides little support to the self-employed. Comprehensive support for the self-employed such as start-up consultation is only offered through pilot projects, and the remainder of state loan guarantees to small business owners (firms with less than 10 full-time employees in manufacturing and less than five in services) is around five trillion won. A system that provides living expenses or funds to start again for self-employed who go out of business was established last year. The majority of the self-employed face a big possibility of joining the poorest classes when they close, but no adequate social safety net helps them.

Though the number of the self-employed including those whose entire family helps out is four times larger than that of the agricultural and fisheries population, they have nowhere to turn to due to government neglect. One possible explanation is lack of political pressure. Farmers and fishermen actively speak for themselves through their organizations. The fundamental solution to the crisis of the self-employed is to provide more decent jobs. Unfortunately, the prospects look dim. It will difficult for the government to even achieve its goal of creating 200,000 jobs this year, and recovery of consumption seems far off. Therefore, the government must pool its wisdom to minimize the negative impact of restructuring in the self-employed sector.