Government "Preparing for With Corona"... Opening Exit for Self-Employed and Expanding Policy Finance

Service Industry Production Index 76.2 from January to July... 5.9% Decrease YoY
July Accommodation and Food Service Employment Drops by 12,000

On the 3rd, a sign reading "Tables Including COVID-19 Vaccination Completed Persons" was placed at a restaurant in Nowon-gu, Seoul. On the same day, the government announced that the current social distancing measures (Level 4 in the metropolitan area and Level 3 in non-metropolitan areas), which were scheduled to last until the 5th, will be extended for an additional four weeks until the 3rd of next month. However, considering fatigue from the prolonged distancing, the exemption for private gatherings including vaccinated individuals will be expanded.

In Level 4 areas such as the metropolitan region, private gatherings including vaccinated persons are allowed up to 6 people in restaurants, cafes, and homes, while in areas below Level 3, all private gatherings are allowed up to 8 people. During the week of the Chuseok holiday, family gatherings of up to 8 people, including 4 vaccinated individuals, are permitted even in Level 4 areas. Photo by Moon Honam munonam@

[Asia Economy Reporter Jang Sehee] As the government prepares for With Corona (living with COVID-19), it appears set to establish additional measures for self-employed individuals and small business owners. Unlike past crises such as the IMF foreign exchange crisis or the global financial crisis, the impact is expected to concentrate on vulnerable groups like the self-employed and small business owners. Experts advise that support should be further strengthened alongside improving the self-employed sector's structure.

A senior government official stated on the 12th, "We are currently reviewing how to support the self-employed sector after COVID-19," adding, "In past crises, large corporations and regular workers were mainly affected, but this time, the situation is that those at the bottom cannot endure and are dropping out." The government is considering measures including ▲expansion of policy finance for low-income groups ▲expansion of policy finance for small-scale self-employed and small business owners ▲reduction of repayment burdens.

Prime Minister Kim Boo-kyum also previously stated, "It is now a reality that the government can no longer ignore the desperate cries of small business owners and self-employed people suffering from repeated strengthened quarantine measures."

The government has already allocated 40 billion KRW for next year's self-employed business closure support budget, a 76% increase compared to this year's 22.7 billion KRW.

In fact, as social distancing continues due to the fourth wave of COVID-19, cumulative damages such as sales declines are intensifying. According to the National Statistical Portal (KOSIS), the service industry production index (2015=100) for restaurants and pubs from January to July this year was 76.2, a 5.9% decrease from 81.0 during the same period last year.

An official from Statistics Korea explained, "The base year is 2015 set at 100, so if the number falls below that, it means the situation has worsened," adding, "It is difficult to specify exactly how much sales have decreased, but the correlation between sales and the index is very high." The retail sales index reflects consumer-side factors, while the service industry production index reflects supply-side factors.

Employment in related industries is also deteriorating. According to the Economically Active Population Survey by Statistics Korea, the number of employees in accommodation and food service industries in July this year was 2.14 million, down by 12,000 compared to a year ago, and cumulatively decreased by 562,000 from January to July.

Experts: "Actively support those who want to exit... Labor market flexibility measures should also be prepared"

Experts agree that extensive support and structural improvement will be necessary over the next one to two years.

Professor Ha Joon-kyung of Hanyang University’s Department of Economics said, "In past crises, companies were impacted, but the COVID-19 situation is expected to cause greater damage centered on the self-employed," adding, "If a K-shaped crisis occurs, the middle link breaks, so it is necessary to play a role in connecting this part."

Professor Lee In-ho of Seoul National University’s Department of Economics stated, "Low-productivity self-employed individuals should be helped to exit," and added, "For those who are completely exited, we should also consider how they can enter the employment market."

Jung Kyu-chul, Director of Economic Forecasting at the Korea Development Institute (KDI), said, "It is a priority to distinguish between self-employed people who are struggling due to the temporary shock of COVID-19 and those who lack competitiveness," adding, "Even if they want to exit, costs such as disposing of cooking equipment and restoring interior decorations are high, so practical support is necessary." He also pointed out, "Our seniority-based wage system makes the labor market more rigid," and emphasized, "This opportunity should be used to prepare measures for labor market flexibility."

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