Baby boomers hit by consumption slump

By Lee Hyo-sik

Nearly half of restaurant owners and other self-employed people here who have gone bankrupt this year amid the ongoing sluggish consumption are baby boomers ― those born between 1955 and 1963.

Analysts say a rise in the number of Koreans in their 50s and 60s experiencing financial difficulties is a strong indication of a possible collapse of many middle-class families.

A large number of retired baby boomers still need to earn money to finance their children’s education and retired life. But they often face further hardships in finding work and even if they do, they earn substantially less than before and under poorer working conditions.

Others opt to open restaurants, coffee shops and other small, independent businesses to make money. But many go out of business, lose their savings and fall into poverty.

According to data submitted by the Korea Financial Telecommunications and Clearings Institute on Tuesday, checking accounts of 237 individuals were suspended in the first eight months of this year. Of them, 104, or 44 percent, were those born between 1955 and 1963, up from 40.4 percent during the same period in 2011.

Baby boomers are estimated at 7.13 million, accounting for 14.3 percent of the population. Many salaried workers born in 1955 began retiring in 2010 when they reached 55.

``Many retirees are inadequately prepared for retired life. Thus, it is inevitable for them to open small shops because they have no other means to generate income,’’ said Lee Geun-tae, an economist at LG Economic Research Institute.

But due to intensifying competition and the prolonged economic downturn, many have and will struggle to stay afloat, he said.

``More and more baby boomers face financial hardship and this will hurt their household finances,’’ the economist said, hinting that if such conditions deteriorate further, it could lead to a collapse of the country’s middle class and deepen economic polarization between the haves and have-nots.

``To help baby boomers prepare for life after retirement, the country should raise the retirement age, to reflect the rising average life span of Koreans. This will also discourage retirees from entering the fiercely-competitive service sector,’’ Lee said.

According to Statistics Korea, 1.63 million baby boomers were found to have run their own business in December 2010, accounting for 30.2 percent of the entire self-employed workforce. They were mostly engaged in restaurants, property leasing, wholesale and retail sectors.

Many of them borrow money from banks and other financial services firms to open businesses, which could hit them harder if they go bust.

According to the Bank of Korea, people in their 50s accounted for 28.1 percent of loan takers in 2011, up from 20.4 percent. Nearly 54 percent of them said they borrowed money to cover rising living costs or start a business.

But over 55 percent of restaurants, lodging facilities and retailers here go out of business within three years of opening.