Seoul: Korea's booming semiconductor industry has driven stronger economic growth, yet self-employed business owners face mounting challenges due to high inflation, elevated interest rates, and a weak won. This vulnerable group, which includes veteran proprietors of neighborhood businesses, is increasingly closing their doors as economic pressures intensify.
According to Yonhap News Agency, National Tax Service statistics revealed that 1,168,273 new businesses were registered last year, a 4.1 percent decline from the previous year, marking the fifth consecutive annual drop. Business closures soared to 83.5 percent of new registrations, the highest ratio in 12 years. The restaurant sector, a significant component of the self-employed market, experienced a 13.6 percent decrease in new registrations, the sharpest decline since 2011. This led to a 1.9 percent drop in active registered restaurants, falling below 800,000 for the first time in years.
The situation is particularly concerning as it affects not only newly-established businesses but also long-standing establishments. A record 41,659 restaurants that had operated for at least five years closed last year, along with another record of 2,797 restaurants that had been in business for over two decades. These businesses, which had previously weathered numerous economic crises, are now being forced to shut down.
Despite Korea's economic growth rebounding this year, the conditions for self-employed workers have shown little improvement. The Korean Statistical Information Service reported a 4.2 percent rise in service-sector output during the January-May period. However, much of this growth was driven by a booming stock market, with finance and insurance sectors expanding by 8.7 percent. In contrast, the lodging and restaurant sector saw a mere 0.9 percent increase in output.
The outlook remains challenging as self-employed borrowing approaches 1.1 quadrillion won ($719 billion). The Bank of Korea has indicated potential interest rate hikes, and labor costs are rising. Small business owners, already struggling with payroll, face demands from labor groups for a 16.3 percent increase in next year's minimum wage to 12,000 won per hour.
As the focus remains on semiconductor exports and headline economic growth, the gap between the economy's strongest and weakest sectors is widening, leading to a feared K-shaped recovery. The government is urged to implement targeted measures to alleviate the burden of inflation, interest rates, and exchange-rate pressures on small business owners and lower-income households, ensuring that economic growth benefits are more evenly distributed.