Small Business Owners "Can't Endure Anymore"... Government Remains in the Dark About 'COVID Shock' Impact

Government Fails to Accurately Assess COVID-19 Impact
Considered 'Small Business Owners' for 3 Years Even if Exceeding Criteria

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] There are criticisms that the survey on the status of self-employed and small business owners is excessively slow, making timely response to COVID-19 damages difficult. The face-to-face survey is highly retrospective, failing to properly reflect social disaster situations like COVID-19. Although the government has introduced measures such as loss compensation, loan maturity extensions, and interest repayment deferrals, accurately grasping the COVID shock is considered a priority.

According to the Ministry of SMEs and Startups and Statistics Korea on the 7th, the latest data from the ‘Small Business Owner Status Survey,’ which shows the status of self-employed individuals, is from 2019. Even by current standards, there is a gap of about 1 year and 9 months. Although COVID-19 has resurged four times, there is no way to understand the extent of damage or cumulative levels for each wave. The survey is conducted once a year and includes data such as the number of businesses, number of employees, sales per business, and operating profit per business.

An official from the Ministry of SMEs and Startups explained, "The Small Business Owner Status Survey is primarily a face-to-face survey, so it takes a long time," adding, "there are limits to reflecting rapidly changing situations." On the other hand, surveys related to small and medium enterprises utilize fax or email.

This is even slower than private surveys. The Korea Economic Research Institute under the Federation of Korean Industries conducted an online ‘Self-Employed Status Survey’ last month and revealed that 39.4% of self-employed individuals are currently considering closing their businesses due to reasons such as decreased sales and loan repayment burdens. In contrast, the Small Business Owner Status Survey emphasized intensified competition within the same industry. This is far from the reality of social distancing measures implemented after the COVID-19 outbreak.

The definition of small business owners is also problematic. According to the current Small Business Act, small business owners are defined as those with annual sales between 1 billion and 12 billion KRW and fewer than 10 regular employees by industry.

However, even if small business owners expand their scale and exceed these criteria, they are still considered small business owners for three years. Even if sales exceed 12 billion KRW or the number of regular employees exceeds 10, they belong to the small business owner category. This makes targeted policies for small business owners difficult. A Statistics Korea official explained, "Since there is a three-year grace period even if the criteria for small business owners are exceeded, there are limits to accurately filtering small business owners."

The latest data including ‘business closures’ from Statistics Korea’s enterprise birth and death survey is also from 2018. Statistics Korea explained that since it is necessary to compare with the previous year to identify inactive cases, it inevitably becomes a lagging indicator.

Experts agree that the priority task is to identify the extent of the ‘COVID shock’ on self-employed individuals. Professor Lee In-ho of Seoul National University’s Department of Economics said, "It has been over a year and six months since COVID broke out, but the lack of comprehensive data reflecting the current situation is problematic," adding, "appropriate statistics should have been created for government policies." He also said, "If the current situation is not clearly diagnosed, it becomes difficult to find direction."

Jung Kyu-chul, head of the Economic Outlook Office at the Korea Development Institute (KDI), also advised, "We need to distinguish between self-employed individuals struggling due to the COVID-19 shock and those who are not, and proceed with selective support," adding, "Even if they want to exit, costs such as restoring cooking equipment and interior design are high, so the focus should be on practical support."

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