A self-employed person cooks food at a restaurant in Seoul in this Jan. 27, 2023 photo. Yonhap

The government is considering introducing measures to assist financially struggling self-employed people transition from their unprofitable businesses to paid employment, according to financial industry officials, Sunday.

These measures are prompted by the intense competition among self-employed individuals in Korea, where the proportion of such workers in the overall workforce is two to three times higher than in other advanced nations.

According to the officials, the measures, expected to be included in the economic policy objectives for the second half of this year, will focus on aiding self-employed individuals with unsustainable businesses to cease operations and transition into paid employment.

They will include providing financial assistance, as the government believes that many self-employed individuals find it difficult to close down their businesses due to high amounts of debt.

The government will also offer support measures to assist individuals who have already closed their businesses transition to paid employment.

For those who wish to keep their unprofitable businesses running, the government is considering ways to enhance their long-term competitiveness. This may include initiatives like setting up self-ordering kiosks in restaurants and cafés to reduce labor costs.

"The exit strategy for financially troubled, self-employed people is expected to be a key part of the government's economic policy directions in the remaining half as the risks facing self-employed businesses have reached a serious level," said Kim Hong-ki, a Hannam University economics professor who is an expert on issues concerning in small- and medium-sized enterprises (SMEs).

The government's potential measures come at a time when more relatively young retirees from companies are turning to entrepreneurship after facing challenges in securing employment, amid fierce competition in the job market.

As of this year, Korea boasts over 6 million self-employed workers, constituting 23.5 percent of the country's total workforce. This ratio surpasses that of other major advanced economies, placing Korea seventh among comparable OECD member states as of 2022.

In comparison, the figures were 6.6 percent for the United States, 8.7 percent for Germany, and 9.6 percent for Japan.

Under the circumstances, self-employed individuals in Korea have been grappling with a worsening business environment, particularly after many took out loans to sustain their businesses during the pandemic era.

According to the Financial Supervisory Service (FSS), the delinquency rate on bank loans among self-employed people reached 0.54 percent at the end of March, marking the highest level since December 2012, when it stood at 0.64 percent.

More than 90 percent of the debt defaulters are microbusiness owners.

Other FSS data showed the rate of business closures among all self-employed individuals nationwide reached 9.5 percent in 2022, up 0.8 percentage point from the previous year.

"The fact that nearly one out of 10 unsalaried workers closes down their own business represents an increasing burden on the national economy," the professor said.

Meanwhile, he offered a positive assessment of the proposed exit strategy for self-employed individuals.

"It avoids short-sighted, populist approaches like cash handouts and instead focuses on long-term goals," he said.

The professor emphasized that assisting those who wish to transition from self-employment to wage employment will be particularly timely.

Citing Statistics Korea, he noted that the employment rate of people aged 15 to 64 increased 0.1 percentage point year-on-year to 70 percent in May.

It was the highest level for the month of May since 1989 when Statistics Korea began compiling relevant data.