March 11, 2025
SEOUL – The number of self-employed individuals in Korea has plunged to crisis levels, with 2024 marking the first annual decline in three years. While sluggish domestic demand is a key factor, experts note the downturn is part of a broader structural shift reshaping the economy.
According to Statistics Korea, the self-employed population stood at 5.5 million in January, down more than 200,000 from the previous two months.
On an annual basis, the self-employed population fell to 5.66 million in 2024, a 0.6 percent drop from the previous year, marking the first yearly decline since 2021. The latest figure nears pandemic-era lows, falling just above January 2023’s 5.49 million, while also lower than numbers seen during past financial crises: 5.9 million in 1998 and 5.74 million in 2008.
A key factor behind the sharp decline is the struggle of small merchants facing falling sales amid a prolonged slump in domestic demand. Government data reveals that Koreans spent less than they earned in the last two quarters of 2024, with fourth-quarter spending increasing just 2.5 percent — the slowest growth since early 2021.
The consumption downturn has hit the self-employed hard, with 7 in 10 reporting declines in both sales and net profit, averaging a 13 percent drop in each, according to a recent Federation of Korean Industries survey of 500 self-employed individuals.
The outlook remains grim, with nearly 60 percent of respondents expecting further declines in both sales and net profit this year. Worse, 43.6 percent anticipate shutting down their businesses within three years, citing prolonged performance declines, economic uncertainty and worsening financial conditions.
Experts note that the drop in self-employment is more than just a result of weak domestic spending, but is part of a wider structural shift.
“While weak domestic demand is a significant factor, we must also factor in the rise in overseas spending postpandemic. When considering foreign consumption, overall spending may have actually increased,” said Kim Sang-bong, an economics professor at Hansung University.
Kim also pointed to shifting consumption patterns accelerated by the pandemic, such as a decline in the “hoesik,” after-work dinner and drinks meetings, and a shift toward online platforms for food delivery and grocery shopping — trends that have impacted self-employed businesses. He noted that the recent liquidity issues at supermarket giant Homeplus reflect this shift, suggesting that changing spending patterns are not solely a consequence of the economic downturn, but part of a larger transformation affecting industries across the board.
Jeong Se-eun, an economics professor at Chungnam National University, noted that the decline in self-employment is a natural result of Korea’s shrinking population and demographic changes.
“Fewer people to spend and fewer people to start businesses,” Jeong explained. “The key challenge is transitioning those leaving self-employment into other sectors, alongside broader economic factors like the rise of technology, including artificial intelligence, which is already impacting small businesses.”
Kim agreed, stating that the decline in self-employment will inevitably persist as Korea’s economy restructures to become more competitive. “The reality is that Korea has too many self-employed individuals lacking competitiveness. Rather than supporting them with policies aimed at sustaining or opening new businesses, the government should focus on helping them transition into more competitive sectors.”