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Increases in small business owners according to industry

A new report finds that small business owners with employees have decreased dramatically, while go-it-alone business owners are on the rise. This trend appears to be driven by a sluggish economy and the shift of the distribution structure to the internet, causing more entrepreneurs to cut their payroll or eliminate it altogether when starting a new business. One notable fact is that elderly people (in their 60s and above) are leading the increase in employee-free entrepreneurship.

On Nov. 5, Statistics Korea released an annex on non-wage earning workers and the economically inactive population as part of its Economically Active Population Survey for August 2019. According to this annex, there were 5,662,000 small business owners in August, a decline of 19,000 (0.3%) from last year.

1,535,000 of small business owners had employees, which was down 116,000 (7%) from the same month last year. Over the same period, the number of small business owners working on their own, without any employees, increased by 97,000 (2.4%) to 4,127,000. It should be noted that some small business owners without any nominal employees do work with unpaid family members.

The number of small business owners peaked in the early 2000s at 6 million. Since then, structural changes in production and distribution have driven an overall downward trend in the small business sector. Over the past 10 years, this has been largely driven by a decline in the smallest of microbusinesses, run by a single individual with no employees. But since this past February, there have been growing signs of a reversal in this trend, with more small business owners doing without employees.

The trend of small businesses cutting back on employees or going without can be confirmed in sectors that are particularly sensitive to economic trends. In August, small business owners in the wholesale and retail sectors had decreased by 29,000 overall; on a more granular level, there were 43,000 fewer small business owners with employees, and 15,000 more without employees. The total number of small business owners running restaurants and accommodations increased by 25,600, but the number without employees actually increased by 26,400.

There are multiple factors behind the shrinking number of small business owners with employees. “The number of small business owners with employees seems to have decreased because of poor domestic demand. Another factor is that it’s more common for people to launch a business on their own in order to lessen risk,” said Jeong Dong-uk, section head for employment statistics at Statistics Korea.

“The massive growth in people providing platform-based delivery and housekeeping services also appears to be a contributing factor,” said Kim Jong-jin, deputy director of the Korea Labour and Society Institute. Kim was referring to delivery people who used to be employed at restaurants but are now taking jobs through an intermediary app, where they are nominally regarded as self-employed.

Another view is that these changes reflect employees who were fired by companies struggling to pay the minimum wage, which has been raised sharply over the past two years. But experts admitted that these are all conjectures, because the new statistics by themselves cannot identify the key factor.

It’s also noteworthy that 8.8% of no-employee small business owners have only been in business for less than a year, up 1.6 percentage points from last year. “The share of new businesses doesn’t generally increase in poor economic conditions, but that trend has been bucked by people over 60 who are starting their own businesses because of the poor economy and the aging population,” said Seong Jae-min, head of employment trends for the Korea Labour Institute.

In fact, there were 1,481,000 no-employee small business owners of at least 60 years of age in August, a year-on-year increase of 86,000. That was about the same as the total increase (97,000) in no-employee small business owners.

The economically inactive population in August was tallied at 16.33 million, up 158,000 (1%) from the previous year. This population includes people able to work but not looking for a job, a category that jumped by 349,000 people from the same month last year. It’s presumed that some people who were unemployed last year have stopped trying to find work and instead reported that they’re “taking a break.” The most popular reason for taking a break, provided by 16.9% of respondents, was difficulty finding the job they wanted, while 16.3% said that they were still taking time off after retirement.

By Lee Kyung-mi, staff reporter

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