Business closures by self-employed increasing for those with hired workers

Business shutdowns by the self-employed with hired workers went up for the 10th consecutive month in August, national statistics showed Monday, another sign of an economic slowdown.

The number of self-operating businesses with hired hands decreased by 1,000 last month compared with a year ago, according to Statistics Korea.  

The self-employed are categorized in two different groups -- those that have hired workers and those that do not. Business closures by the latter have been declining steadily since March 2014. In August last year, 196,000 people abandoned their business compared with a year before. The former, contrarily, increased for 19 straight months until September last year before the trend was bucked.

Figures from the two most recent months showed that the trend was again reversing. In July, the latter group increased by 6,000, followed by 79,000 in August.

The prevalent view is that the economic slump is the cause.

Those who hire extra workers operate bigger businesses than people who do not use additional employees, creating higher business costs that make them more vulnerable to slowdowns that erode their profits.

"Business owners who have hired employees can take risks and expand their operations when the economy is booming to make more money, but they can weaken during an economic slump because they rely heavily on loans," professor Kim Kwang-seok of Hanyang University said. "When sales fall, paying wages and paying back loans become hard, leading to closures." (Yonhap)