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Life savings are wasted opening chicken joints

As older Koreans are squeezed, they gamble on small businesses

Sept 27,2019
Many retired baby boomers struggling to land jobs are opening businesses, such as coffee shops and fried chicken joints, going into markets already well-served and arguably saturated.

According to Statistics Korea on Thursday, last year 82,668 new businesses opened, taking the total of self-employed to 4.1 million. This is a 2.1 percent increase compared to the previous year.

However, 67 percent of the newly opened businesses, or 55,574, were those owned by people who were 60 years old or older. That’s a 6.4 percent increase year-on-year.

People in their 50s opened 17,573 businesses, a 1.3 percent increase year-on-year. Younger people opened far fewer businesses, ranging between 2,000 and 4,000 for each 10-year statistical age group.

The statistics agency in its report stated that people in their 50s own the most business, while those in their 60s opened the most such establishments.

Among the 4 million small businesses in the country, 35 percent, or 1.42 million, are owned by those in their 50s. People in their 40s owned 1.13 million, while people in their 60s owned 927,194.

Among businesses that were opened, the largest sub-group was the lodging and restaurant category. Last year, 18,624 lodging and restaurant businesses were formed.

Coffee shops topped the list. Last year, 9,648 coffee shops were opened, a 16.9 percent increase. Korean restaurants serving meat were next, with 4,500 opened, a 6.6 percent increase, while 2,154 bakeries were opened last year, up 12.6 percent.

Logistics and transportation businesses were next on the list with 13,225 new businesses opened, a 3.4 percent increase.

The biggest concern has been the oversaturated market that has been affecting the income of those who have been starting their own ventures.

According to the statistics office, in 10 years, the total number of new businesses has grown 25 percent, or an additional 840,000. On average, the number has been growing 2.3 percent annually.

Lodging and restaurant businesses account for 18.7 percent of the new businesses.

These businesses are usually opened because no skills are required. But many older people pour their life savings into the businesses and struggle in the crowded markets.

Last year, as sales increased by 2 percent in the service industry, lodging and restaurant sales declined 1.6 percent.

Experts have pointed out that expensive leases and the rising minimum wage have only made the situation worse. There have been growing concerns that these failing business end up driving down household income.

A recent study released by KB Financial Group found that seven out of 10 self-employed businesses were forced to close shop within five years, especially in the restaurant business.

Additionally, in a survey of 1,000 self-employed businesses, 87.4 percent said they spent their severance pays or their savings in starting their business, while 39.6 percent said they borrowed money.

The survey allowed multiple answers.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]


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