Save the small business ownersSmall business owners cannot even close their money-losing operations in Korea due to a sharp fall in rent in popular districts in Seoul.
Business has become so bad that even retail spaces in the hot locations around Gangnam Station in southern Seoul and the university districts of Sinchon and Hongdae in western Seoul are renting for cheap prices.
Small retail businesses are troubled due to several factors. The market is overcrowded and business is slow. The government rubbed salt on these entrepreneurs’ wounds by raising the minimum wage by 29 percent over two years. At the current rate, more than 1 million out of 6.8 million small business owners could lose their businesses by the end of the year.
Since their debt exceeds 600 trillion won ($538 billion), their delinquency could rock the financial sector if it is coupled with rising interest rates. The government and ruling party hurriedly announced 7 trillion won in aid for small businesses. But these aid packages offer little comfort to most shopkeepers.
The presidential office also added a secretary devoted to small business owners last month. In Tae-yeon, the new secretary, said in a radio interview that the Blue House would form a task force that includes small business owners to come up with a more helpful and effective set of measures. But that alone cannot help them. Many of these people started their own business after they lost a salaried job.
They must be able to find a replacement job so that the closure of their business does not translate into risk for the economy. The economy must become better to improve consumer incomes to revive the retail business.
Again, companies must be encouraged to invest and hire. The labor market must become flexible and regulations should be removed to allow more room for companies to invest and expand. As long as the National Assembly backpedals or stalls on deregulation bills, small business owners have no hope.
The minimum wage system also must be revised so that wage levels can be differentiated based on workplace size, business type and location.