Chapter 1 – Introduction

Section 1 – Research gap

Research on Korean self-employment began in earnest approximately 20 years ago in the aftermath of the Asian foreign exchange crisis. From the beginning, researchers identified deep, endemic weakness within the Korean self-employment sector (Ryu JW et al., 1999; Geum JH et al., 2000; Ryu JW et al., 2000; Ryu JW, 2004; Kim WY et al., 2001; Jeon BY, 2003; Geum JH et al., 2003; Seong Ji-Mi et al., 2004; Geum JH et al., 2006). Even a generation later, the issues surrounding self-employment weakness remain unresolved. Earnings and working conditions of self-employed workers have deteriorated relative to wage and salary workers (Lee SR, 2018a; Joint Government Agencies, 2018a), and the polarization of income and other indicators of the self-employment sector continue to worsen (Lee Byung-Hee et al., 2016; Lee SR, 2018a). Over the years, it has become even more difficult for weak self-employed workers to overcome business weakness, and the average education level of Korean self-employed workers has fallen steadily (Kim WY, 2009; Kim WY et al., 2016). Conditions in the Korean self-employment sector are not even keeping pace with general economic growth in Korea (Ryu JW et al., 1999; Ryu JW, 2004; Lee CW et al., 2017)

It appears, therefore, that although the problem of overall weakness in the self-employment sector has been evident for at least a generation (Ryu JW et al., 1999; Kim WY, 2009; Special SME Committee, 2005), policies to resolve issues already identified in the academic and public sectors have proven effective, and approaches that previously failed are still being prioritized (Lee SR, 2018a; Joint Government Agencies, 2018a).

Korea has significantly higher levels of self-employment than most advanced countries, where self-employment is associated with entrepreneurship, innovation, and economic growth through competition. If we assume that a high self-employment rate is associated with a weak self-employment sector, we might conclude that the difficult self-employment conditions in Korea could be improved by reducing the self-employment rate. This reasoning suggests that lower self-employment rates would lead to more innovative self-employment activity based on an entrepreneurial mindset, which in turn could contribute to economic growth.

In fact, the Korean self-employment rate has declined since the early 2000s. However, if it is true that conditions in the Korean self-employment sector should improve with a drop in the self-employment rate, then several questions remain unanswered. Despite the long-term decline in Korean self-employment, why does the sector still exhibit such signs of weakness? From an international perspective, why is the Korean self-employment rate so high, and why is it out of step with the national development level? Why have past predictions about the self-employment rate failed to materialize in key Korean service industries (Ryu JW et al., 1999)? In the absence of satisfactory answers to these questions, we may need to consider that Korea’s high self-employment rate may not be a cause of the sector’s weakness and that the recent drop in the Korean rate of self-employment may be an indicator of worsening self-employment weakness.

Several related research tasks must be completed before we can answer these questions. The first step is to clearly define the concept of and criteria for self-employment weakness, as well as identify the causes of that weakness. Secondly, this weakness in the self-employment sector must be quantified, and third, the economic impact of this weakness needs to be evaluated. While previous studies provide useful insights, we believe that further investigation is necessary to fill this research gap. Accordingly, this study stems from the recognition that the existing literature does not provide clear and complete answers to three research questions.

1) What is self-employment weakness?

One approach to understanding self-employment weakness is through the push/pull hypothesis.

Section 2 – Composition of the study

Section 3 – Academic contribution of the study