SMEs trapped in ‘Peter Pan Syndrome’ hampering job growth

Adults who resist growing up are often said to suffer from "Peter Pan Syndrome." Similarly, small and medium-sized enterprises (SMEs) can be seen as trapped in a similar mindset when they choose not to expand into larger companies, preferring to maintain their current status. This reluctance to grow stems from a desire to avoid losing the various tax exemptions and government support that come with being a smaller business.

This self-imposed limitation has been criticized for decades. The OECD’s 2000 Economic Survey of Korea highlighted that excessive assistance to SMEs had weakened their ability to improve productivity independently. The OECD recommended that the Korean government shift its focus from heavy reliance on government support to fostering the inherent dynamism of SMEs. Since then, SME support policies have frequently been scrutinized in OECD reports, leading to expectations that government officials would have to request a softer tone in these evaluations before their release.

The latest OECD report echoes these concerns, pointing out the overwhelming number of SME support programs. Jon Pareliussen, the report’s author, noted that there are 1,646 support programs across national and local governments. Despite this extensive network of assistance, SME productivity continues to lag. Pareliussen advocates streamlining these programs to make the support system more effective, describing the current system as "fragmented and disastrously adjusted."

While opinions may vary on whether government support is excessive, it is clear that SMEs stuck in the "Peter Pan Syndrome" are contributing to a shortage of quality jobs. According to the Korea Development Institute, only 14% of jobs in South Korea are in large corporations, the lowest percentage among OECD countries and less than half the OECD average. Jobs in large companies typically offer better wages and benefits compared to those in SMEs.

The lack of job opportunities in large corporations is driving younger workers out of the job market. A recent example is a young man in his 20s who left his SME job after 16 months, citing long hours and conflicts with his superior. Last month, the number of young people taking time off work for no apparent reason reached its highest level ever recorded for July. This trend of young people taking time off has been at a peak for three consecutive months, highlighting growing dissatisfaction and the challenges faced by SMEs in retaining younger employees.