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Monday, November 29, 2004

"Self-employment, no rescue" (Donga Ilbo series)

Donga Ilbo has begun a series on the plight of self-employed in Korea under the title "Self-employment, no rescue" (自營業 비상구가 없다). Seems there's a sense of urgency around the topic

"Opening new business en masse"; some basic facts about the situation: employment structure is changing, permanent wage employment diminishing; misled government policies; lack of proper infrastructure around small businesses; lack of entrepreneurial culture (자영업 문화의 부재).
Donga gives a lot of emphasis on the "distortions" of the labor market, and the effect that the hard-line unions protecting the interests of the permanently employed in large companies; that is a difficult question and addressing it gets one easily labelled as being against labor and union rights, but the discrepancy between permanent and non-permanent labor is undeniably severe.

The government saw self-employment as a way to alleviate the unemployment caused by the econimic crisis of the late 1990s ("The IMF"). [That could also be seen in the huge increase of research on small businesses at the turn of the century; research funds seem to have been available.] The good intentions in granting low-interest loans to prospective self-employed have brought non-intended consequences such as masses of people with bad credit records (what's 신용불량자, luottokelvoton in English?) and failed or barely surviving shopkeepers living on the edge of poverty.
정부도 뒤늦게 자영업 창업 촉진책이 적잖은 부작용을 가져왔음을 인식하고 있다. 저부가가치의 생계형 창업이 경기 진폭을 더욱 확대하고 심각한 불경기가 겹치면서 신용불량자와 도시빈민으로 전락하는 등 경제문제를 넘어 사회문제화하고 있기 때문. 최근 전체 신용불량자 수는 줄어들지만 유독 40대 이상에서 신용불량자가 늘어나는 것도 창업자금으로 빌린 돈의 이자도 갚지 못하는 자영업자가 늘고 있기 때문이다.
Lastly, the artice notes the abruptness or unpreparedness that is typical for business opening in Korea.

(I'm reminded of Mr Pak, 2nd from right in the blog header picture, who went to work for another to learn pangakan keeping sometimes in late 1970s; all he was given to was cleanign floors, so he quit after a week and went headlong to open his own place. "I was a bit afraid [kôbi nada] when the first customers came." That is what's called paetchang; he fared well in the end, and has been in the business for 25 years now.)

(Continues in "44% of the self-employed living in poverty" (Donga Ilbo) (same in English as well)

And those who read Finnish may take a look at a discussion paper by Jaakko Kiander (pdf file) from the Government Institute for Economic Research on the relation of entrepreneurship or small businesses and employment.From the English summary:
Comparison of OECD countries clearly shows that a high rate of self-employment is positively correlated with low employment and low income. Self-employment is not correlated with economic growth. Within a comparable set of edvanced countries the high income level is best explained by high relative number of business sector employees, which paradoxically is not an increasing function of self-employment or entrepreneurship.

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