Self-employed workers take second jobs as rent, ingredient costs skyrocket

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Self-employed workers take second jobs as rent, ingredient costs skyrocket

Published: 06 Jul. 2024, 07:00

KIM JU-YEON
kim.juyeon2@joongang.co.kr

Tables are empty at a restaurant at Mapo District, western Seoul in July 2021. [JEONG JUN-HEE]

The number of self-employed workers taking on multiple jobs to make ends meet hit a record high amid a lingering slump in domestic demand.

Lee, a self-employed worker in their 40s running a bakery in Dobong District, northern Seoul, goes to their nighttime delivery part-time job at 10 p.m. after closing shop for the day. Lee, who runs the bakery alone without employees due to high labor costs, says the extra income is necessary due to the rising costs of rent and ingredients.

“It’s tiring, but I have no choice but to run two jobs to pay off loans and sustain my livelihood,” Lee said.

Some 187,000 self-employed people reported having, at one point, had a side job in May of this year, an on-year increase of 2.1 percent and an all-time high since such data were first collected in 2014, Statistics Korea's MicroData Integrated Service indicated Thursday.

The number of self-employed people fell by 2.6 percent in the same time period, making the figure all the more striking.

The Covid-19 pandemic accelerated the number of self-employed people taking on side jobs. Even with outdoor restrictions lifted, the number hit record highs of 179,000 in May 2022 and 184,000 in May 2023.

Sluggish demand, a contributor to high consumer prices and interest rates, remains a driving force. The retail sales index — an indicator of consumer spending on retail goods — for the January-to-May period fell 2.3 percent on year, the biggest drop since 2009, the tail end of the global financial crisis. Revenue naturally drops for self-employed people when consumption falls.

Number of self-employed people with side jobs hit a record high in May 2024. [LEE JEONG-MIN]

To make matters worse, self-employed workers now have snowballing arrears — and many are not earning enough to pay back the loans they borrowed during the Covid-19 pandemic, when interest rates were low.

Self-employed borrowers' overdue loans totaled 10.8 trillion won ($7.8 billion) as of the end of this year's first quarter, according to the Bank of Korea, a record high since 2009.

The loan delinquency rate grew around three times bigger, from 0.5 percent in the second quarter of 2022 to 1.52 percent in this year’s first quarter — a massive leap compared to the total household loan delinquency rate, which rose from 0.56 percent to 0.98 percent in the same period.

High rent and ingredient costs also continue to plague sole proprietors. Though consumer price inflation continued to slow and hovered around 2 percent last month, agricultural products skyrocketed by 13.3 percent on year. With the minimum wage having soared 76.7 percent over 10 years, many restaurants are replacing human workers with kiosks and server robots.

Pictured is a kiosk in a cafe in Seoul in January. [YONHAP]

While self-employed people “continue to be pressured over real income, jobs found through online platforms, such as delivery work, have become more accessible,” said Ha Joon-kyung, an economics professor at Hanyang University.

“Self-employed people are naturally drawn to side jobs that they can do in their scrap time.”

Statistics show that self-employed people are having a hard time covering their household spending with just their business income alone. The average monthly business income of a self-employed head of household is 2,740,407 won, lower than the average monthly household spending of 3,355,490 won, according to Statistics Korea’s MicroData Integrated Service. Either the head of household or household members’ earned income, averaging 786,675 won, and transfer income such as government subsidiaries, averaging at 717,343 won, fill the necessary gaps, according to the survey.

Research also shows a large income gap. The highest earning top 20 percent of self-employed workers earned an average of 6,835,313 won and spent 5,843,352 in household spending. But the bottom quintile earned 396,416 won, around one fifth the amount of their household spending expenses of 1,894,417 won. The numbers point to a trend of deepening polarization wherein only certain shops do well.

Self-employed heads of households, on average, earn 2,740,407 won in business income in a month. This isn't enough to cover the average monthly household spending of 3,355,490 won. [LEE JEONG-MIN]

“The tougher the economy gets, the more salaried workers go on temporary leave, and the proportion of workers who take on side jobs among self-employed people and nonsalaried workers increases,” said Noh Min-sun, a research fellow at the Korea Small Business Institute (KSBI).

“Shutting down a store also takes up expenses for self-employed people so it may be that they are unwillingly taking up side jobs to take care of immediate living expenses.”

The government announced a 25 trillion won comprehensive support plan for self-employed and small business owners this week, but experts say fundamental structural reform, such as the expansion of exit strategy plans that allow self-employed people to make career transitions, is needed.

The support plan will include the extension of loan repayment periods will be and the subsidy of fixed costs such as those of rent and electricity bills, as well as recovery measures to aid with the costs of shutting down and job training stipends for those who lose their business.

Kitchen equipment is stacked at a street selling secondhand kitchenware in Jung District, central Seoul. [NEWS1]

“Subsidizing the costs of shutting down shops is important, too, but there is an urgent need for bridge policies that allow self-employed workers to get new jobs after they quit their businesses,” said Lee Jung-hee, an economics professor at Chung-Ang University.

“It is especially important that employment policies are also made so that retirees in their 60s, who are increasing in number, do not jump into starting their own business headfirst and instead find different jobs.”

“There must be structural reform so that self-employed people can more boldly decide to shut down business. Furthermore, consulting and job matching services that offer a second chance, such as in re-employment or restarting their business, should be expanded,” KSBI researcher Noh said.

BY NA SANG-HYEON [kim.juyeon2@joongang.co.kr]