Restaurant Staff Disappearing: "Owners Running Solo"... Fallout from COVID-19

Transition to Solo and Family Management Due to Labor Cost Burden... Paying Family Wages Increases Household Profit
Meeting COVID-19 Variables, Sales Decline Leads to Labor Cost Savings... Reduced Employee Working Hours and Layoffs

[Asia Economy Reporter Lee Seon-ae] Restaurants with employees are disappearing. Due to the burden of labor costs, many are switching to 'one-person management or family management.' Especially this year, the unexpected COVID-19 pandemic is expected to accelerate this trend even further.

◆Working personally to save even part-time wages= According to the 'Statistical Yearbook 2019' by the Korea Foodservice Industry Research Institute on the 28th, wages for owners and family members increased from an average of 4.56 million KRW in 2015 to 15.57 million KRW in 2016, and then soared to 21.2 million KRW in 2017. The institute emphasized that while this statistic alone may not fully confirm that the number of foodservice self-employed without employees or family-run restaurants has increased, it is a noteworthy statistic considering the continuous rise in self-employed without employees in the Economically Active Population Survey.

◆Sharp increase in one-person self-employed= In fact, the number of one-person self-employed has steadily increased. Analyzing the Economically Active Population Survey by Statistics Korea, the number of self-employed last year was 5,605,600, shrinking by 32,300 from the previous year, the lowest in 24 years since 1995 (5,569,000). Especially, self-employed with one or more paid employees showed the largest decrease (113,600) since 1998 (247,000). The number of 'self-employed without employees,' working alone or with family, increased by 81,300. This increase was the largest in 18 years since 2001 (102,200). Typically, the decrease in self-employed with employees and increase in those without employees is interpreted as self-employed running small businesses reducing staff and replacing them with themselves or unpaid family members due to worsening business conditions and labor cost burdens. The minimum wage increased by 16.4% in 2018 and 10.9% in 2019, increasing labor cost burdens amid sluggish business conditions.

Seo Yong-hee, senior researcher at the Korea Foodservice Industry Research Institute, said, "As wages to be paid to employees continuously increase, the number of employees is being reduced or shifted to part-time work," adding, "The total amount or proportion of employee wages remaining constant is due to the shift to family management, which is a management strategy to increase the total profit of not only the business owner but also the owner's household by paying wages to family members." He further predicted, "This trend was prominent in 2017 when the minimum wage sharply increased, and combined with the spread of unmanned automated facilities, restaurants without employees are expected to continue expanding."

In fact, self-employed people cite labor cost burdens as their biggest management difficulty. According to a survey conducted last month by the Korea Federation of Small and Medium Business targeting 1,200 small business owners nationwide on the 'Impact of Minimum Wage by Industry, Region, and Size on Small Business Owners and Workers,' 66.4% of businesses responded that the labor cost burden due to minimum wage increases is significant.

◆COVID-19 forces owners to work alone= The problem is that this trend is expected to become more pronounced this year. The direct hit from COVID-19 has caused a significant drop in sales. This atmosphere is being sensed in many places on the ground. Lee, the owner of a snack bar in Jongno, said, "Compared to this time last year, sales have dropped by about 55%, and since COVID-19 seems to be prolonged, I plan to reduce labor costs," adding, "I let go of the serving staff and decided that my younger brother and mother will come to the store to help for the time being." Park, the owner of a set meal restaurant in Dongdaemun, said, "Customer visits have stopped as if by magic, and with current sales, it's hard to even cover rent," adding, "I recently talked to my part-time worker about reducing working hours, but if that is not feasible, I plan to manage the store alone."

The Korea Foodservice Industry Research Institute reported that in an emergency survey of 600 member restaurants of the Korea Foodservice Association regarding the impact of COVID-19 on the foodservice industry, 85.7% of the surveyed businesses responded that customer numbers decreased due to this situation. The survey compared customer numbers during the two weeks around the 20th of last month, when the first COVID-19 case was confirmed. The institute expects the impact on the foodservice industry to intensify as confirmed cases rapidly increase.

This content was produced with the assistance of AI translation services.