Market Update: Self-employed businesses are the economy’s front-line employment buffer – Full Analysis

 
Song Chi-young
 
The author is the chairman of the Korea Federation of Micro Enterprises.
 
 
 
According to the Basic Statistics on Small and Medium Enterprises for 2023, Korea has about 8.31 million businesses, of which more than 7.9 million are categorized as microenterprises. In other words, small self-employed operations account for 95.2 percent of all businesses in the country. The share of self-employed workers in the economically active population also remains above 20 percent, far higher than the average of 13.4 percent among the 38 member states of the Organisation for Economic Co-operation and Development (OECD). From this perspective, microenterprises not only support domestic demand but have long served as a crucial safety valve for employment in the Korean economy.
 

On May 23, as forecasts emerged that the number of self-employed businesses closing this year would exceed one million, a passerby walks past shuttered shops in the Jonggak underground shopping arcade in Jongno District, central Seoul. According to the “Small Business Trends Report for the First Quarter of 2025” released by Korea Credit Data, a total of 3.62 million business operators held personal business loans as of the first quarter, of whom 13.8 percent were found to have already closed their businesses. [NEWS1]

 
That foundation has been badly shaken since the Covid-19 pandemic. Over the past two years alone, more than one million microbusinesses have closed, sending a warning signal through the broader economy. Recognizing the gravity of the situation, the government has allocated the largest-ever budget for small merchants in an effort to contain the damage. Even so, the amount still accounts for less than 1 percent of total central government spending, which stands at 728 trillion won ($491.1 billion) for 2026.
 
Against this backdrop, the steady stream of labor-focused policies is difficult to watch from the sidelines. Since the introduction of the minimum wage in 1988, it has risen every single year for the past 37 years without exception. Even appeals to freeze the minimum wage so that small businesses can at least survive now feel like a struggle in themselves. On top of that, microenterprises are being asked to contend with a growing list of labor-friendly initiatives, including expanding the Labor Standards Act to workplaces with fewer than five employees, introducing a 4.5-day workweek and abolishing early-morning delivery services.
 
Self-employed operators are also members of Korean society. When the economy grows and incomes rise, it is only reasonable that their living conditions should improve as well. But while profits vary widely by business size and sector, and price levels differ by region, the minimum wage rises uniformly each year without differentiation. Expanding labor regulations and shortening the workweek would, in practice, make hiring even more difficult and force already vulnerable business owners into nonstop self-exploitation. Eliminating early-morning delivery, which has at least helped reduce raw material procurement costs, would further push struggling merchants toward the edge. That is why these proposals raise serious concern.
 
 
From the perspective of someone who has spent decades running businesses on the economic front line, policies that effectively demand entrepreneurs “hand over money already earned” in the name of improving working conditions feel like a form of legalized coercion. This is not to deny that during the rapid, compressed growth that began in the 1960s, Korea was rightly criticized for poor worker welfare and industrial safety. That history is well known.
 
Since the 1980s, however, Korean society has made sustained efforts to improve labor conditions. Explicit guarantees of the three basic labor rights, broader application of the Labor Standards Act, the introduction of the minimum wage, the enactment of the Serious Accidents Punishment Act and more recent debates over the so-called Yellow Envelope Bill all reflect more than four decades of reform. Yet as workers’ rights have been significantly strengthened, many microentrepreneurs have found themselves pushed into an increasingly precarious position.
 
This imbalance is no longer anecdotal. In June, the Korea Federation of Enterprises released survey results showing that more than 30 percent of the self-employed earn a monthly income below the minimum wage level. It is little wonder that some business owners openly lament that giving up ownership and becoming an employee might be the better option.
 

On Oct. 1, the Korea Federation of Micro Enterprises holds a press conference at its main conference room, with participants displaying hand-held placards stating that they oppose the introduction of a 4.5-day workweek unless the abolition of weekly holiday pay and the withdrawal of a planned expansion of the Labor Standards Act to workplaces with fewer than five employees are addressed first. [KOREA FEDERATION OF MICROENTERPRISES]

 
Without businesses, there can be no workers, and without either, the state itself cannot function. If microenterprises collapse, Korea cannot remain whole. It is time to move beyond the simplistic dichotomy that frames businesses as inherently strong and workers as inherently weak. Policymakers should also listen carefully to the appeals of microentrepreneurs, who form one of the pillars of the economy.
 
As days pass, it becomes harder to manage raw material costs, while the influence of platform companies continues to grow. Yet policy authorities tasked with balancing employment and labor appear focused almost exclusively on strengthening workers’ rights, while turning a blind eye to the mounting hardships faced by microenterprises.
 
Despite their small scale, microbusinesses occupy a unique place in the Korean economy. Given their importance and contribution, there should be more active discussion and concrete measures aimed at building a social safety net for this sector.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.