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Share of self-employed to fall below 20% for 1st time in labor market

Share of self-employed to fall below 20% for 1st time in labor market

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A self-employed restaurant owner takes a break at her eatery in Seoul’s Myeonogdong shopping district, Sept. 22. Yonhap

By Yi Whan-woo

The share of self-employed workers out of the entire Korean labor market is expected to fall below 20 percent in 2024, for the first time in over 60 years, according to Statistics Korea, Monday.

The projection comes as more self-employed individuals are shuttering their businesses due to unprofitability and difficulties in repaying loans taken out from banks during the pandemic.

“The decline in the proportion of non-wage workers in the labor market is typically associated with a country’s economic prosperity. However, in the case of Korea, the decline is not influenced by improvements in employment quality or economic growth factors,” Statistics Korea said.

It reported that the number of individuals working independently as business owners or freelancers in Korea reached a total of 5.63 million from January to August.

This figure represented 19.7 percent of the country’s total labor force of 28.54 million, which includes salaried workers, during the same period.

According to the statistics agency, the 19.7 percent figure is “likely to remain unchanged for the rest of 2024 unless there is a drastic shift in the labor market.”

“Given these circumstances, it can be accepted as a fact that the share of self-employed individuals in the labor market will be below 20 percent this year,” the agency explained.

It realized, it will be the first time that self-employed people will make up less than 20 percent of all laborers since 1963, when the government began compiling such data, the agency noted.

The decreasing share of self-employed individuals has been observed over time as the Korean economy has expanded.

For instance, these individuals accounted for 37.2 percent of the labor market in 1963, a time when the country was prioritizing the production of light industrial goods following the 1950-53 Korean War.

The share of self-employed individuals subsequently declined to 30 percent in 1989 and dropped further to 20 percent in 2023, as the country’s economy expanded rapidly with the growth of heavy industries, IT sectors, and other advanced businesses that demanded more wage workers.

Korea still ranks high among OECD countries regarding the proportion of self-employed individuals, standing at fifth place out of 30 member states in 2023.

“However, the reasons behind the decline in the rate of self-employed individuals are concerning,” Statistics Korea said.

Separate data from the National Tax Service (NTS) revealed that 75.1 percent of taxpayers classified as sole proprietors reported a monthly income of less than 1 million won ($762) in 2022.

Sole proprietors are individuals who exclusively own and operate their own businesses, often comprising many small, self-employed ventures.

NTS data also revealed that nearly 1 million self-employed businesses closed down in 2023, marking the highest number on record.

According to the Bank of Korea, 410,000 self-employed individuals were facing financial difficulties as of the second quarter of this year.

Their outstanding loan balance reached 121.9 trillion won, reflecting a 12.8 trillion won increase compared to the previous year.





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