South Korea’s self-employed sector, long considered the backbone of the local economy, is facing a deepening crisis as prolonged economic woes force a growing number of small business owners to shut their doors.
A three-story building in Eunpyeong District, Seoul, recently revealed a stark sign of economic hardship in South Korea. In the basement, a 200-square-meter (approximately 2,150 square feet) storage space is cluttered with used credit card terminals, cash boxes, kiosks, and cables. This space belongs to a company that rents out such equipment to restaurants and stores for around 50,000 won ($34.46) per month. However, the flow of returned devices has far outpaced new rentals.
Kim Jong-hyun, 49, who has been running the business for over two decades, said at least five shop owners visit daily to return their equipment after closing their businesses. “Not even during the COVID-19 pandemic did we see this many people closing down,” he said.
Shop owners who fail to fulfill the typical three-year contract often return terminals or cash boxes without paying the penalties meant to cover the equipment costs, leaving Kim at a loss. Reselling the items is also challenging because they are used.
“People avoid buying second-hand equipment because it reminds them of the failed businesses of others,” he explained. As a result, items like cash boxes, which originally cost around $70, are sold in bulk to scrapyards for approximately $13–$21 per 100 units—roughly $0.21 each.
Kim’s situation highlights a larger crisis, as weak domestic demand is forcing many self-employed workers—the backbone of S. Korea’s local economy—to close their businesses. After struggling through the pandemic with hopes of recovery, small business owners are now facing a tough reality, hit hard by high interest rates, rising inflation, and the ongoing economic slowdown.
According to Statistics Korea, the average number of self-employed workers between January and November this year stood at approximately 5.67 million, accounting for 19.8% of all employed people in the country. This marks a sharp decline from 37.2% in 1963, the first year such data was recorded.
By 1989, the rate had fallen below 20%, and it hovered at exactly 20% last year. If the trend continues, 2024 may mark the first time the annual figure dips into the 10% range. The absolute number of self-employed workers has also fallen, decreasing by 24,000 from 2023′s 5.69 million.
While some view this decline as part of a global trend linked to industrial modernization, experts warn that it reflects an alarming domestic slowdown in S. Korea.
Lee Jung-hee, an economics professor at Chung-Ang University, said, “The ongoing economic downturn is causing more businesses to close and reducing the number of self-employed workers. Many who shut down end up relying on government welfare, which increases the burden on public resources,” Lee explained.
According to the National Tax Service, the number of business closures filed by S. Korean individual entrepreneurs reached 910,819 last year, accounting for 9.5% of all self-employed ventures—roughly one in every ten businesses. This represents a 13.9% increase from the previous year.
Meanwhile, the once-familiar sight of workers in their 40s and 50s leaving corporate jobs to open small businesses is fading. With closures rising, many are opting to stay in their current roles or leave the workforce altogether. Data from the Ministry of SMEs and Startups showed that new business registrations for the third quarter of this year stood at 255,306—a 7.5% drop from the same period last year and the fourth consecutive annual decline.
