Editorials
Semiconductor boom, small business gloom
While semiconductor-led growth lifts headline indicators, rising costs, weak demand and mounting debt are driving a record number of long-running small businesses, especially restaurants, out of operation.
A restaurant stands vacant on Ewha Womans University Street in Seoul's Seodaemun District on July 6 after recently going out of business. According to National Tax Service statistics released the same day, the number of business closures reached 83.5 percent of new business registrations last year, the highest ratio since 2013, underscoring mounting pressure on Korea's self-employed amid weak domestic demand and persistently high borrowing costs.
NEWS1
Korea's booming semiconductor industry has fueled stronger economic growth, but the lingering effects of high inflation, high interest rates and a weak won continue to weigh heavily on domestic demand. Nowhere is the strain more evident than among self-employed business owners, long-regarded as one of the economy's most vulnerable groups. Even veteran proprietors who have operated neighborhood businesses for decades are increasingly closing their doors.
According to National Tax Service statistics, 1,168,273 new businesses were registered last year, down 4.1 percent from a year earlier and marking the fifth consecutive annual decline. The number of business closures rose to 83.5 percent of new registrations, the highest ratio in 12 years.
Restaurants, one of the country's most representative self-employed sectors, have been hit especially hard. New restaurant registrations fell 13.6 percent from the previous year, the sharpest decline since 2011. Because closures exceeded new openings, the number of active registered restaurants dropped 1.9 percent to 798,969, falling below 800,000 for the first time in years.
The trend is particularly alarming because it is no longer limited to newly-established businesses. A record 41,659 restaurants that had operated for at least five years shut down last year. Another record 2,797 restaurants that had remained in business for more than two decades also closed. Businesses that survived numerous economic crises are now being forced out.
Although Korea's economic growth has rebounded this year, conditions for self-employed workers have improved little. According to the Korean Statistical Information Service, service-sector output rose 4.2 percent during the January-May period. Much of that increase, however, reflected gains in finance and insurance, which expanded 8.7 percent amid a booming stock market. Output in the lodging and restaurant sector increased only 0.9 percent.
The outlook may become even more difficult. Self-employed borrowing has approached 1.1 quadrillion won ($719 billion), while the Bank of Korea has signaled additional interest rate increases. Labor costs are also mounting. Even as many small business owners struggle to cover payroll, labor groups are demanding a 16.3 percent increase in next year's minimum wage to 12,000 won per hour.
As attention focuses on semiconductor exports and improving headline growth, the widening gap between the strongest and weakest parts of the economy is becoming increasingly apparent. The feared K-shaped recovery is turning into reality. The government should adopt more targeted measures to ease the burden of inflation, interest rates and exchange-rate pressures on small business owners and lower-income households, while ensuring that the benefits of economic growth are shared more broadly.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
