By Yoon Ja-young
When it was reported that people in Greece were demonstrating against the government’s plan to raise the age of retirement, many here wondered why. People in developed countries mostly dream of early retirement, when they can do the things they always wanted, such as traveling and volunteering as compensation for decades of hard work. For most people here however, retirement is something to avoid as they are not financially prepared.
Of course, there are those with a stable pension who can look forward to retirement. Yun Seung-no, who retired as a professor last summer, is enjoying his second life. He lectures at a college twice a week as an emeritus professor, and in his remaining free time, he meets friends, travels with his wife and does a lot of volunteering at the Catholic church he joined a few years ago. He owes it all to his pension.
However, regular and handsome pensions are only available here for a few professions such as teachers, government officials and soldiers. Those who saved enough are also OK. Yu Kyung-sub, who retired from an executive position at a mid-tier manufacturing company, became a farmer in Hoengseong, Gangwon Province. While he was working as an executive, his health was ruined as he had to drink too much to entertain buyers. The stressful life also made him smoke a lot. “I got emphysema. I was in a terrible condition,” Yu said.
His wife made the decision to leave everything behind and move to the provinces. They rent a small farm house, and started amateur farming. They grow and sell corn, Chinese cabbage and kimchi to their acquaintances in Seoul. Yu regained his health and is also making a small income, enough to get by in the countryside. They made the bold decision to move as they own a small multiplex house in Shillim-dong, southern Seoul, where they receive a small monthly rent.
But if the national pension was all they had, as with most retirees here, life would be tough. National Pension recipients receive on average 770,000 won a month, far below the living expenses necessary in Seoul.
Consequently, people here have to continue working. The problem is most of them have no choice but to start their own business.
Kim Myung-ho, who retired from a medium-sized company where he worked for nearly 30 years, opened a convenience store in a residential area in central Seoul with his severance pay and some of his savings.
He said it is much tougher than life as a salaried worker. “I have some part-time workers, but I should be at the shop most of the time. It’s like the whole family is tied to the business.”
He refused to talk about his exact income, but said it isn’t much after deducting rent, royalties to the franchise headquarters and wages for the part-time workers as well as other costs. He said he wants to close the shop, but he can’t as he has signed up for a five-year franchise subscription. If he quits now, it would incur financial losses.
Many people are turning to entrepreneurship after retirement due to the lack of a social safety net and decent jobs for the elderly. The situation is expected to become more serious as baby boomers born between 1955 and 1963 start retiring.
Those in their 50s running their own business marked 3.1 million in October, the highest ever and up 107,000 from a year ago.
“It seems to be related with the retirement of the baby boomers. Many of them plan to live their second life by starting their own businesses after retirement,” said Kim Bok-soon, a researcher at the Korea Labor Institute. But most of the time it’s not because they want to.
She said that from a positive perspective, opening a business is helping to pull down the jobless rate. “However, as many of them are concentrated on competitive micro-startups, the likelihood of bankruptcy high. There is high risk of being exposed to poverty.”
According to the 2010 report by the Small Enterprise Development Agency, four out of five self-employed people in the country are running small businesses for a subsistence level income. It underscores that as they didn’t prepare properly and lack experience they are likely to lose in the competition against large businesses.
The market is already saturated for the self-employed. “The ratio of self-employed among people with jobs stood at 25.3 percent as of 2008…It is very high compared with advanced countries where the ratio stands at 10 percent, including 9.5 percent in Japan,” Kim said.
The country already has too many corner shops, too many hair salons, and too many restaurants. Many of those who start a business close down after losing money. According to data released by the Korea Foodservice Industry Association last year, 16.2 percent of restaurants closed down within one year of opening, and 66.5 percent within three years. A total of 298,758 restaurants closed last year.
The number of self-employed had been falling since 2005, but it rose again in August, due to the retirement of baby boomers. The baby boomers in the country total around 7.1 million, taking 15 percent of the total population. Their generation will see mass retirements within five to 10 years, but they have to live on their own for the next 30 or 40 years.
Sohn Min-jung, a researcher at the Samsung Economic Research Institute, said that other OECD member countries saw the number of self-employed decrease upon increase of the per capita income and development of the economy. “They become salaried workers.”
He said that Japan and some countries in Northern Europe solved the problem by pulling up the retirement age. “Simply put, it is like transferring the social burden to the private sector, the businesses. This is ineffective for businesses.”
He said there should be a social compromise among workers, businesses and the government over this, such as cutting wages. “The compromise would be hard to achieve, though,” he added.