Seoul: The number of business closures in South Korea has exceeded one million for the first time in history, highlighting the ongoing struggles faced by business owners in the country. Retail and restaurant sectors have been particularly affected, accounting for nearly half of the closures, as many entrepreneurs grapple with high interest rates, inflation, and stagnant sales.
According to Yonhap News Agency, data from the National Tax Service revealed that 1,008,282 individual and corporate businesses filed for closure in 2024, marking the first time the one million mark has been surpassed since the data began being compiled in 1995. Retail businesses were the hardest hit, representing 29.7 percent of closures, followed by restaurants at 15.2 percent and real estate businesses at 11.1 percent.
South Korea's self-employed population comprises a significant portion of the workforce, with more than half of owner-operators aged 50 and older. The impending retirement of 9.54 million second-generation baby boomers is expected to further increase business start-ups and shop openings. Without addressing the oversupply of self-employed individuals, the rise in business closures appears inevitable.
In response to the financial challenges faced by the self-employed, the Lee Jae Myung administration has introduced measures such as cash handouts and debt relief. On July 4, the National Assembly approved a 31.8 trillion won ($23.9 billion) supplementary budget, including 12.17 trillion won for cash handouts to all citizens and a program to forgive debt for economically vulnerable individuals, including small business owners.
However, these measures have been criticized as short-term solutions. The increase in money circulation could lead to inflation, reducing consumption and further harming the self-employed. Additionally, debt write-offs may create a moral hazard, encouraging individuals to accrue more debt in anticipation of future relief.
President Lee has suggested additional debt write-off measures, which could total 16 trillion won and benefit 1.13 million debtors. While erasing debt for struggling credit delinquents can help them regain financial stability, further debt forgiveness could undermine the nation's credit system.
To address the root causes of mass business closures, the government is urged to focus on strengthening career change programs to facilitate reemployment. Structural reforms, rather than temporary financial relief, are seen as essential to resolving the issues caused by industrial changes and high management costs, such as those experienced during the Moon Jae-in administration's minimum wage hikes.