The curse of owning a business

The common advice salaried workers nearing retirement hear from people who already retired is to think twice about starting your own business. They are warned that they can lose their health and money from doing so. The curse of owning your own business is already well known. Of five newly opened businesses, one closes down within a year. After five years, seven out of 10 are out of business. The industry has become overly competitive amid demographic changes from the low birthrate, fast aging and the retirement of the baby boom generation. The pie is becoming smaller, but new entries are getting bigger.

Recent data adds more gloom. It shows that more businesses close down every year. The age group giving up their businesses the most has also lowered to people in their 40s from people in their 50s. According to the Hyundai Research Institute, people registering to close their businesses totalled 660,000 in 2013, outnumbering the 580,000 applying to open businesses. Exits have gotten faster than entries. One out of two owners quitting their businesses was in their 40s. The age group most crucial in the working population has become vulnerable. The data underscores how hard it has become to do business and how scarce jobs are.

The labor market has become harsh for people in their 40s and 50s due to the prolonged economic slowdown and the extension of the retirement age. Large business groups have reduced as much as 30 percent of their senior positions. Companies facing slumps such as shipping, refinery and construction have slashed their senior employees. From the financial sector alone, 50,000 people received redundancy notices last year. These people are mostly in their 40s and 50s and are still able and eager to work. With few job positions open, they have no other choice but to open their own business. Self-employed people have been on a sharp rise since 2009 and reached 5.37 million by the end of 2013.

If job opportunities increase, they will not have to take the risk of opening their own business. But the economy is failing to pick up. New openings remain stubbornly low. Reforms in the labor sector are slow. The government must come up with a radical and comprehensive measure to overhaul the labor market and increase employment. If the post-baby boomer generation falls, there is no future for our economy.

JoongAng Ilbo, Jan. 30, Page 30