Nearly half of Korea's self-employed business owners are earning less than 10 million won ($7,200) in annual operating profit, with analysts warning that a structural crisis is collapsing profitability even as revenues hold steady or rebound modestly, as costs rise far faster.
According to the "Self-Employment and Self-Employment Policy" report released by the Korea Labor Institute on Monday, an analysis of the Economic Census and other data showed that 47.7 percent of businesses had operating profit of 10 million won or less as of 2023. That translates to roughly 830,000 won per month. The figure has more than tripled from 13.2 percent in 2007.
Over the same period, the share of businesses operating at a loss or generating zero operating profit also jumped sharply, from 1.3 percent to 12.8 percent.
The overall median operating profit fell to around 10 million won, and even self-employed workers in the top 25 percent bracket earned only slightly more than 20 million won. This means 75 percent of all self-employed individuals are earning less than 20 million won a year, well below the income of a typical wage worker, the researchers said. The bottom 10 percent were in the red with negative operating profit, while the bottom 25 percent hovered around zero.
The main cause of this profitability collapse is not a decline in revenue but a rise in costs. The report noted that a clear "decoupling" phenomenon has emerged in the self-employment market, with revenue and operating profit moving in opposite directions. Sales revenue has not fallen significantly, yet actual operating profits have plunged.
The spread of the platform economy was identified as a key factor behind the surge in costs. As delivery apps and online distribution channels have grown rapidly, massive commissions and advertising fees that did not exist in the past have become heavy fixed costs. The share of transactions conducted through platforms in the accommodation sector soared from 29.1 percent in 2020 to 52.8 percent in 2023, while the retail sector's share also rose sharply from 10.9 percent to 26.6 percent over the same period. "A structure is forming in which platforms provide sales opportunities while taking a larger share," the researchers said.
The deteriorating profitability has directly led to a decline in the number of self-employed workers. The number of self-employed in Korea fell from 5.642 million in 2017 to 5.153 million in 2024. This is interpreted as going beyond a mere economic downturn cycle, indicating that the self-employment ecosystem itself has entered a phase of structural contraction.
The report emphasized that future self-employment policy responses must shift away from unconditional "revenue expansion" support toward a focus on "cost control." The researchers proposed measures including stronger regulation of platforms and franchise structures, institutional supplements to ease rent burdens, and strengthening the social safety net by converting self-employment employment insurance from the current voluntary enrollment system to mandatory enrollment, guaranteeing minimum income even in the event of business closure.
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