The Shadow of 2.77 Million Women-Owned Businesses Era... Direct Hit from COVID-19

'2021 Survey on Women-Owned Businesses' Results Show
4 out of 10 Employees Quit... 79.3% Decrease in Non-Regular Workers
Women-Owned Business Sales Account for 9.8% of Total Businesses

Daejin Metal's 'Tin Tube'

#. Lee Seong-ran, CEO of Daejin Metal, produces tubes that can hold cosmetics and daily necessities using tin (Sn), which is harmless to the human body. Since taking over her father's business in March 1995, she has grown the company into a well-known eco-friendly metal enterprise in Daegu. In the early days of the business, the products were made of lead, which caused disagreements between CEO Lee and her father, who pursued eco-friendliness. In 2020, she achieved a milestone by supplying tin tubes worth 250 million KRW to a cosmetics export company. However, she has faced difficult times due to the strong price competitiveness of plastic products, the ongoing COVID-19 pandemic for three years, and rising raw material costs. Although she planned to upgrade production facilities and establish equipment for recycling eco-friendly containers, securing funding was not easy. Recently, noise complaints from the factory have prevented night shifts, making it difficult to meet product delivery deadlines. People around her have said, "Why not just close the factory and live comfortably? Why does a woman have to struggle in manufacturing?" but CEO Lee cannot easily give up the family business that has lasted for decades.

#. Kim, a female entrepreneur who operated a residence near Samsung Electronics’ Suwon plant, was hit hard by the prolonged COVID-19 pandemic. She targeted long-term residents coming to Samsung from various countries, but with air travel halted, customers stopped coming. When sales plummeted by nearly 90%, Kim had no choice but to reduce her staff from 24 to 5. She said, "Companies led by women often operate in face-to-face industries, which were especially hard hit by COVID-19."

Recently, the Ministry of SMEs and Startups published the ‘2021 Women-Owned Business Survey Report.’ This survey was conducted from August to October last year, targeting a sample of 3,000 out of approximately 47,000 corporations with female CEOs and annual sales exceeding 500 million KRW. The results were somewhat shocking.

According to the report, as of the end of 2020, the number of employees working at women-owned businesses was 774,000, a 40.7% decrease compared to 1,306,000 in 2018 before the COVID-19 pandemic. In other words, only 6 out of 10 employees continued working, while 4 left their jobs. Although the statistics do not specify whether the turnover was voluntary or involuntary, it revealed that over 40% of employees had decreased within two years. Since the survey was conducted after nearly a year of the pandemic, when the economic downturn was at its peak, it is reasonable to infer that COVID-19 influenced the reduction in workforce. Notably, the number of non-regular employees in women-owned businesses decreased by 79.3%.

Trends in Workforce Changes of Women-Owned Businesses with Sales Over 500 Million KRW in 2018 and 2020 (Source: Women-Owned Business Survey)

◆ R&D Staff in Women-Owned Businesses Decreased by 87.2% = Among manufacturing industries, workers in textiles and apparel decreased by 72.1% over two years, while in non-manufacturing industries, face-to-face sectors such as accommodation and food services (-89.9%) and information and communications (-81.7%) saw sharp declines. The number of research and development (R&D) employees dropped from about 115,000 to 15,000, an 87.2% decrease, and sales, marketing, and service workers fell from 480,000 to 280,000, nearly halving.

More than half (52.9%) of women-owned businesses reported a decrease in revenue compared to the previous year. When asked about factors negatively affecting management activities, the most cited was decreased demand due to the overall economic downturn (73.7%), followed by worsening external economic conditions (23.4%) and intensified competition among companies (17.2%). The most common response to management difficulties was reducing labor costs (26.3%), which can be interpreted as a reason for the sharp decline in the number of employees.

The areas where management difficulties were felt most were marketing management such as securing sales channels (48.6%), followed by financial management including funding (35.5%), and human resource management such as securing personnel (25.5%). Female entrepreneurs cited burdens related to balancing work and family (15.9%) and disadvantages in loan conditions during financial transactions (14.5%) as areas where they felt disadvantaged. Only 3.2% of companies had experience investing in domestic facilities in 2020, and only 4.1% reported having export experience.

◆ Women-Owned Businesses Are Numerous but 96% Are Small Businesses = The Ministry of SMEs and Startups announced that the total number of women-owned businesses reached 2.77 million, accounting for 40.2% of all businesses, a record high. However, a closer look tells a different story. Large corporations among women-owned businesses make up only 0.01%, negligible compared to 0.12% for male-owned businesses. Conversely, the proportion of small businesses with low added value is 96.32%, higher than 91.51% for men. As a result, although women-owned businesses account for 40.2% of the total number, their sales amount to only 9.8% (551 trillion KRW) of the total. Among domestic unicorn companies valued at 1 trillion KRW, only one is women-owned: Kurly.

People Power Party leader Lee Jun-seok and floor leader Kim Ki-hyun are taking a commemorative photo with participants at the policy discussion on "Directions and Tasks of the New Government's Women's Enterprise Policy," hosted by Assemblywoman Han Mu-kyung's office at the National Assembly Members' Office Building on the afternoon of the 6th.
[Image source=Yonhap News]

Although the Women-Owned Business Support Act was recently amended, there are many criticisms that practical support for women-owned businesses is insufficient. The Ministry of SMEs and Startups’ budget for supporting women-owned businesses remained at about 8.8 billion KRW last year and this year. The Balanced Growth Promotion Committee (Article 6) stipulated in the Women-Owned Business Support Act has not disclosed meeting results in recent years. The Korea Institute of Design Promotion, which is obligated to promote design development for women-owned businesses (Article 12), has no specialized support programs for women-owned businesses. Only one program supporting promising style-tech companies includes women-owned businesses as a preferential category during recruitment.

The recent startup and venture boom also feels distant to women-owned businesses. According to the ‘Startup Recipe Investment Report 2021,’ the investment ratio by gender of founders last year was 92.4% for male startups and only 7.6% for female startups. Last year, 121 female startups raised a total of 914.7 billion KRW in investment, but Kurly (Market Kurly) accounted for 475.4 billion KRW (52%), showing a concentration of investment.

There are many voices questioning why women-owned businesses need to be fostered when all companies are the same. However, the women’s business community argues that support must be strengthened to increase women’s economic participation amid continued low growth and declining potential growth rates due to low birth rates and aging. South Korea’s female labor force participation rate was 59.1% in 2020, ranking near the bottom (33rd) among 37 OECD countries. Especially, women-owned businesses have a female employment rate 2.3 times higher than male-owned businesses, contributing to job creation and poverty reduction. Kim Bo-rye, senior research fellow at the Women’s Economy Research Institute, said, "It is necessary to establish a system to nurture entrepreneurs among talented women and improve accessibility to government policies such as funding, sales channels, and R&D."

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