The internecine carnage of the Korean War that ended in 1953 reduced to ruins all the vital infrastructure of South Korea, making it one of the poorest states in the world. However, since then a series of manufacturing feats has uplifted the nation to a strong economic hub. This “Miracle on the Han River,” named after the waterway coursing through Seoul, the capital, has come to dominate popular narratives about the Korean economy.
Even as exponential economic growth driven by manufacture and export filled the state coffers and boosted wages, employment capacity stagnated. People resorted to self-employment, setting up market booths, street kiosks, karaoke pubs, tea cafes, and all sorts of retail and service shops to entertain people yearning for comfort and convenience outside of home.
During the Asian Financial Crisis of 1997, struggling corporations either fired or offered employees “honorable retirement” with severance checks, generating a gargantuan influx of labor into self-employment. The Global Financial Crisis of 2008 prompted the same trend, albeit on a smaller scale and primarily affecting the young populace as companies shied away from new recruits. Now, a quarter of workers in South Korea are self-employed, the sixth highest proportion out of the 38 OECD member states.
Some problems have persisted. Whereas signing up for national social insurance and labor accident insurance, all subsidized by employers, is mandatory for every wage worker, self-employed people rarely opt for the program due to its hefty premiums without external subsidies. Given that the majority of self-employed people – more than 4 million – run their businesses without any employees or toil alone under temporary contracts and outsourcing from large firms, they seem equally in need of these insurance schemes but are unable to afford them.
Structurally and realistically speaking, the self-employed are closer to laborers than entrepreneurs. In the absence of social safety nets similar to those instituted for wage workers, their living standard has come to depend significantly on the vicissitudes of the market economy.
At the turn of the century, conglomerates advanced into restaurant, retail, and distribution businesses, gradually carving out a lion’s share of consumers’ money. Although the government has restricted the number of corporate franchises and imposed reduced business hours and compulsory bank holidays on giant supermarket chains for almost a decade now, their online sales are invincible.
Amid the pandemic, as social interaction and transactions have moved online, and small street businesses are either forced to shut down or run on government-mandated hours amid anti-COVID measures, big firms have raked in record profits with their online shopping platforms and intricate delivery grids. Research by the Korea Development Institute reveals that the total debt within the self-employed sector has reached $827 billion, a 21 percent year-on-year increase. In 2021, an average of 20,000 people quit their shops or kiosks every month. In light of the economic impacts of the virus, South Korea’s self-employed are business owners or entrepreneurs in name only, but in reality just laborers not covered by social insurance and labor protection.
At a rally convened by the National Self-Employment Emergency Task Force in early January 2022, self-employed people of various stripes waved candles calling for justice for hundreds of their fellows who committed suicide as direct consequences of the pandemic. A survey by the Seoul metropolitan government illustrates that sector-wise revenues have plummeted by 42 percent on average, rendering rent-paying practically impossible. Meanwhile, almost a third of the survey respondents have developed severe depression.
A microcosm of their nationwide woes can be found in the peculiar dependence of some portions of the service industry on more than 50 military bases within the country. Around 600,000 conscripts spend their free time and money in garrison towns. Since protracted lockdowns have severed the daily interaction between military personnel and local businesses, sources of income for the latter are tapering off.
Kyung-hwa owns a hair salon on the outskirts of Daejeon, a city lying in the heart of the country. “Normally, I used to receive dozens of soldiers a day. I cut their hair all by myself,” she says. Although the authorities have recently finished inoculating the soldiers and started allowing them outside again, she recalls “fidgeting my day away” awaiting updates on military lockdowns.
A few blocks away, a man in his 50s bemoans the reduced foot traffic into his corner shop, which plies soldiers with skincare products. Despite the lockdowns, lorries carrying products ordered online can still enter the military precincts.
Formerly a public servant in the army, the owner of a Western-Asian fusion restaurant in the town has found a way to weather his cash-strapped circumstance. He now delivers food on his scooter to soldiers craning their necks for his arrival by the iron gate. In fact, an increasing share of self-employed people either close their shops to switch entirely to freelance delivery or undertake it as a side job.
As people order take-out through delivery apps, there has been an enormous demand for “platform laborers,” self-employed personnel accepting requests and offering service via digital platforms, mostly food delivery apps. The Presidential Commission on Policy Planning defined these workers as “falling in the gray area between wage labor and self-employment,” some of whom are technically “wage laborers camouflaged as businessmen.”
The issue, the commission identified, lies in South Korea’s labor laws and social security systems, which rely on “the strict dichotomy between wage labor and self-employment.” The government expressed bafflement that the technological advances and COVID-19 have “mass-produced laborers belonging to the lowest income percentile.”
Apart from the platform laborers, the legislature reserves the category of “special employment types” for those working under subcontracts based on commissions, mostly self-employed couriers working for delivery companies. This is another sector witnessing augmentation in its rank as more one-person business owners undergo forced occupational change.
According to the Seoul Institute, more than 80 percent of couriers working for delivery corporations are self-employed, hence outside the boundaries of legal protection and Industrial Accident Compensation Insurance. The Ministry of Land, Infrastructure, and Transport estimates that the annual increase in the number of parcel drivers has reached 8.5 percent owing to the “coronavirus situations and exponential growth of online shopping.” Although swift delivery service and corporate profiteering have become a universal given, the drivers are paid 70 cents per package, and work for 72 hours a week without yearly holidays.
On a normal day, one worker delivers around 250 packages to customers. After covering extra outlays such as upkeep and the taxes required of a trucking business, their compensation hovers around the minimum wage. Night-time deliveries to meet the daily quota, physical exertion, work stress arising from customer complaints, and occasional road accidents all contribute to the deplorable working conditions. Despite the physical and mental distress, more and more self-employed people are being cornered into this exhausting yet expanding labor niche.
The deaths of 22 parcel drivers from overwork over the past two years prompted rounds of negotiation between the National Delivery Labor Union and CJ Logistics, the delivery company with the largest market share in the industry. As the arbitration process ended in a fiasco, strikes have flared up since December 2021 and some union members stormed and occupied the CJ headquarters in February 2022. CJ insists on an addendum that requires mandatory same-day delivery and a six-day work week.
The union members, on the other hand, plead for a 60 hours-a-week delivery schedule, company aid for sorting parcels, and financial support for the Industrial Accident Compensation Insurance — for which CJ denies liability since the delivery drivers are “self-employed.” As CJ dismisses direct engagement with the union’s demands, maintaining that “we don’t have responsibility for bargaining,” the arbitration has been slogging through mediation from the Democratic Party and civil society groups.
Now, the night streets are darker. In silent protest, struggling street-business owners extinguish the neon lights that normally illuminate South Korea’s narrow streets. The strikes and protests show that COVID-19 has exacted unequal tolls on different segments of the population.
As the Omicron variant pervades the society and hospitals start to fill up, the government has had no choice but to prolong some restrictions. Yet the government’s compensation for the sacrifices of the self-employed and the public acknowledgement of their agony have been negligible.
The Small Enterprise and Market Service, a government agency in charge of monitoring the self-employment economy, had doled out only hundreds of dollars for two years’ of suffering. Although the government recently released a lump sum relief package of $2,500 to every small business owner, its timing — just ahead of the March 9 presidential election — raised eyebrows. Meanwhile, more and more people grouse that their parcels arrive late due to the strikes.
The fact that the self-employment sector has abnormally distended signals that something is ailing in the labor market. Almost a million retirees and more than a million people in their 20s consider self-employment since they want to work but the job market is saturated. Retirement age has not caught up with longer life expectancy, and retirement ennui and depression induce retirees to turn to self-employment. For the young, employment in public or private sectors requires grueling years of preparing for entrance exams and accumulating a vast number of extracurricular activities, something that not everyone can easily afford.
As businesses close, however, the only alternative seems to be leasing a truck and plunging into the hectic world of delivery, which welcomes even more carriers while other labor opportunities vanish. This is why the crisis of the self-employment sector translates into South Korea’s overall labor crisis, no longer serving as the vent for the country’s jobless economic growth and cutthroat labor market.
South Korea’s Self-Employment Crisis
Source: Frappler
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