As the large-scale retirement of the baby boomer generation occurs, the number of older self-employed individuals is rapidly increasing, leading to predictions that they will burden the macroeconomy.
Lee Jae-ho, Vice Minister of the Bank of Korea's Macro Analysis Team, noted on the 15th at a joint symposium held at the Sejong KDI conference room under the theme 'Poverty and Labor in an Ultra-Old Society: Asking for Policy Directions' that this is the case. He suggested, "To prevent the surge in older self-employed individuals, it is necessary to create an environment where the elderly can securely work for a long time in wage jobs."
◇ "The second wave of baby boomer retirements intensifies... over 1 million increase in older self-employed individuals expected"
According to the Bank of Korea, as the retirement of the second wave of the baby boomer generation (9.54 million) — the largest single generation in South Korea — intensifies, the number of older self-employed individuals is expected to rise significantly. By 2032, the number of older self-employed individuals is projected to exceed 1 million compared to 2015 (1.42 million), reaching 2.48 million.
Vice Minister Lee said, "With most existing older self-employed individuals maintaining their businesses, and if the second wave of the baby boomer generation gradually reaches the legal retirement age of 60 within the next 10 years, the surge in older self-employed individuals will continue."
The issue is that older self-employed individuals are financially vulnerable. They primarily work in sectors with low entry barriers and are exposed to excessive competition. According to the Statistics Korea economic activity population survey, 65.7% of self-employed individuals over 60 years old work in vulnerable sectors such as transportation, warehousing, accommodation, food services, retail, and construction. This figure is about 10 percentage points higher than the rate for individuals aged 15 to 59 (56.2%).
Due to insufficient preparation for self-employment and low productivity, their profitability is lower compared to other age groups. The Small and Medium Business Administration's '2022 Survey on the Actual Conditions of Small Business Owners' reported that the percentage of individual businesses with annual operating profits below 10 million won is 35% for those in their 60s and 40.8% for those in their 70s, higher than other age groups (below 30%).
The debt ratio of new individual business owners is most severe among those in their 60s. According to the Ministry of SMEs and Startups, the cumulative debt ratio for new individual business owners in their 20s and 30s is below 100%, but it rises to 105% for those in their 40s, 125% for those in their 50s, and 140% for those in their 60s. Vice Minister Lee pointed out, "The increase in older self-employed individuals is a significant risk factor not only for financial stability but also for economic growth."
◇ "Elderly people with insufficient pensions are pushed into early entrepreneurship"
The Bank of Korea stated that it is necessary to analyze the background of the elderly entering self-employment and to prepare alternatives to alleviate this trend. It emphasized the need to focus on the elderly who have low pension payments and long working hours in survival-type reemployment.
Vice Minister Lee explained, "Survival-type elderly individuals value the possibility of continued work and tend to retire from existing jobs relatively early for the sake of entrepreneurship." The average retirement age for survival-type individuals is shown to be 1.7 years and 1.9 years earlier than for 'leisure-seeking types (high pension, low work)' and 'high income-seeking types (high pension, high work)', respectively.
The Bank of Korea emphasized that creating an environment where the elderly can work in stable wage jobs for extended periods is crucial to alleviate excessive entry into self-employment.
Vice Minister Lee stated, "It is necessary to consider strengthening the 'wage system reform and reemployment system after retirement' so that the elderly can continue to work in their existing jobs. If regular employees can continue to work after the age of 60, there is a strong incentive for them to prefer wage jobs, even if their income decreases somewhat."
According to the Bank of Korea, a worker earning 50.9 million won annually who remains in a regular job after age 60, even if they receive a lower income, still finds remaining in a regular job advantageous. Assuming the said worker receives only 60% of their previous income (30.65 million won), it is likely to exceed the median income of 28.35 million won for self-employed individuals aged 60 to 64.
Vice Minister Lee also suggested alternatives such as ▲ large-scale services in the service industry ▲ strengthening the matching between rural and small businesses ▲ retraining for digital transformation of the elderly. He added, "To create demand for wage labor in the service industry where many older self-employed individuals work, we could encourage large-scale operations or consider ways to strengthen matching between older retirees and rural small businesses facing labor shortages."