Government’s cash handouts do little to support struggling self-employed

We often hear that being self-employed is hard. When walking down any street, you'll see empty storefronts with 'for rent' signs. Yet, the familiar story of self-employed people’s struggles is repeated for a reason—the numbers are getting worse. Last year, 980,000 business owners reported closing their businesses, the highest number since such statistics have been tracked. The 23% rise in self-employed individuals becoming unemployed in the first half of this year is more than three times the rate of overall unemployment growth. These numbers are hard to dismiss by saying, we already know they're struggling.

The numbers continue to pile up as the tears of self-employment keep welling up. In the first six months of this year, Seoul Guarantee Insurance Company has already paid out more than twice as much as it did for all of last year to cover overdue bills from restaurant owners. This amount is already higher than in 2020 and 2021, when COVID-19 was spreading. By the end of June, seven out of ten self-employed people had borrowed money from three or more financial institutions, and their delinquency rate has more than tripled compared to three years ago. The combination of pandemic-related debt and weak domestic demand is pushing more self-employed people to the edge.

Seeing the same numbers, the government has been busy devising measures. Last week, it announced plans to revitalize consumption and offer tailored support for the self-employed. There is also a talk about another plan for the self-employed this month. Although it hasn't yet been approved by the National Assembly, next year's budget includes funds to support the self-employed. The government intends to provide up to 300,000 won per year for delivery and courier expenses to self-employed individuals starting next year.

However, there are some aspects that make us scratch our heads. Recently, the government emphasized its commitment to supporting the 'rebound' of self-employed people by not only easing their financial burdens but also strengthening support for finding new jobs and restarting businesses. Yet, in the customized support plan released on the 2nd, the additional funding for 'rebound support,' including reemployment, is 300 billion won—less than 3% of the total. The total policy finance provided over the two-year period starting in July 2022 was over 47 trillion won, but only 1 trillion won was allocated for rebound support. This is far from enough to escape the 'debt trap' and establish a foundation for a fresh start.

A high-ranking government official once said, “When it's storming outside, it's a public servant’s job to hold an umbrella over people’s heads and step out into the rain with them.” In other words, you should do whatever it takes to make things a little easier, even if that means deviating from policy goals or achieving only a small impact. I nod in agreement, but I can't help feeling that the support for the self-employed is nothing more than a show of being out in the rain with them. Many self-employed individuals have long been an issue for the Korean economy. It's time to move away from cash handouts and invest more government resources and time in job transitions and retraining. We can't wipe away their tears with the way we're doing things now.