Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Self-employed individuals over 60 show lowest loan delinquency rate, still struggle to retire
A self-employed resturant owner prepares to open for business in Seoul in this photo taken in January 2023. Newsis
By Yi Whan-woo
Demographic age shift brings growing economic challenges
A man surnmaed Hong, once an office worker and now in his late 60s, says he never thought he would be running a fried chicken restaurant for more than 10 years after his official company retirement. It was the necessity of taking out loans to deal with economic challenges during the pandemic era that changed his timeline, he said.
“I manage to pay back the principal and interest on time, but I am concerned that I may have to sell chicken for another 10 years or otherwise I may not be able to pay it all back,” Hong said, declining to give his full name.
Hong represents a growing number of self-employed individuals who are in their 60s or older, as Korea is set to become a super-aged society from next year.
A super-aged society is where people aged 65 and older represent up to 20 percent of the population. This age group represented 18.4 percent of Korea’s population in 2023, well above the 7 percent threshold needed to be considered an aging society.
According to a Korea Labor Institute (KLI) report on self-employed business people, the proportion of those aged 60 or older among the entire group was highest at 36.4 percent in 2023.
In the same year, those in their 50s accounted for 27.3 percent, while those in their 40s made up 20.5 percent, those in their 30s stood at 12.4 percent and those in their 20s and younger were at 3.4 percent.
“This dominant trend of senior people being self-employed reflects Korea’s rapidly aging demographic,” the KLI said, noting that roughly a quarter of a century ago self-employed people were predominatly middle-aged.
In 2000, those in their 40s accounted for 31.5 percent of self-employed individuals nationwide, compared to those in their 50s who were recorded at 19.2 percent, those in their 60s or older stood at 17.6 percent, those in their 30s were at 25.5 percent and those in their 20s and younger were at 6.2 percent.
“It is noteworthy that the proportion of the people aged 60 or older more than doubled over 23 years, and such a pace of increase is not visible in younger age groups,” the institute pointed out.
In separate data, Statistics Korea said that the number of self-employed people in their 60s or older reached 2.07 million as of 2023.
It was the first time that the number surpassed the 2 million mark, constantly growing from 1.71 million in 2019 to 1.81 million in 2020, 1.88 million in 2021 and 1.99 million in 2022.
In the current economic climate, Hong is somewhat better off than a growing number of people in his age group who are failing to service loan payments on time after they borrowed money from banks to sustain their businesses during the pandemic era.
According to the credit rating agency NICE Investor Service, the number of delinquent loans for three months or longer among self-employed people nationwide increased by nearly 50 percent to 27.3 trillion won from 2022 to 2023.
During the cited period, the rate of delinquencies for those who took out loans from various financial firms averaged at 2.47 percent, up from 1.69 percent.
The rate for those in their 60s stood at 2.51 percent, which is lower than those of younger groups – 6.59 percent for those in their 20s, 3.9 percent for those in their 30s, 3.61 percent for those in their 40s and 2.95 percent for those in their 50s.
“Nevertheless, it should be noted that more older adults are borrowing money from various financial firms than other age groups and that the delinquency rate for the group has a higher chance of going up in an aging society,” said the Citizens' Coalition for Economic Justice (CCEJ), a civic group.
It referred to different data from NICE Investor Service, which showed 374,231 people aged 60 or older took out loans from more than one firm in 2023.
The number was up 10.15 percent from the previous year. Such an increase in pace was the steepest for all age groups, including 9.29 percent for those in their 20s.
“Aging self-employed individuals and their delinquent loans can dent the country’s economy in the mid- to long-term and relevant measures should be taken in advance,” CCEJ said.