[Editorial] Self-employed quandary

In yet another effect of the prolonged economic downturn, the number of self-employed people in the country has continued to decline in recent years. Recent figures from the national statistics office showed the number, which peaked at 5.86 million in July, decreased to 5.77 million in October and further to 5.45 million last month. Compared to a year earlier, the number of self-employed people fell by 21,000 in January, marking the first year-on-year decrease in 18 months.

As the economy is forecast to grow by far less than 3 percent this year, this downward trend in the self-employed sector is likely to continue for a period of time. It is predicted that there will be far more closures than startups particularly in the areas such as restaurants, accommodating facilities and retail stores, which are locked in overheated competition and more sensitive to economic conditions.

The country’s self-employed sector has been saturated with too many competitors, as shown by the fact that there is one restaurant for roughly every 80 people. According to figures from the Financial Supervisory Service, 28.2 percent of Korea’s workforce is self-employed, much higher than the average ratio of 16.1 percent for member states of the Organization for Economic Cooperation and Development. The proportion of self-employed people stands at 11.9 percent in Japan, 11.6 percent in Germany and 7 percent in the U.S.

It can hardly be expected that self-employment will continue to hold back the jobless rate with corporate hiring remaining at insufficient levels. The number of employed people decreased for three consecutive months to 24.05 million in January, pushing up the jobless rate to 3.4 percent, according to the data from Statistics Korea. It was the first time that the monthly unemployment rate has surpassed 3 percent since August.

It appears that government policymakers are facing a dilemma over whether to shore up self-employment or prompt its restructuring.

Questions may well be raised about whether it is sensible to help keep uncompetitive and inefficient self-employed businesses afloat, but it is still necessary to provide proper financial support to prevent their rapid collapse. Self-employed business owners borrowed 253 trillion won ($232 billion) last year, or more than a fifth of all loans by local lenders. A pre-workout program announced by the FSS last week to help indebted self-employed people may be inevitable to ease the potentially explosive problem of household debt, which could bring down many middle-class families.

On the other hand, there would be a limit to the means of diverting a growing number of baby-boomer workers from joining the overly competitive sector as they have no other work options. Extending the retirement age or expanding reemployment programs for them could further exacerbate youth joblessness.

The government and political circles have been far from consistent and effective in handling matters related to the self-employed. At times, measures they have put forward have only caused disputes among self-employed people like a recent decision by a government commission to designate bakeries as one of the areas reserved for small entrepreneurs, which prompted protests from franchise stores, most of which are run by moms and pops with their own capital.

Efforts should focus on encouraging self-employed businesses to be more innovative and self-reliant, not to look for government support. The ultimate way to put a proper cap on the overflowing sector may be to create more corporate jobs through economic growth.