FAMILY Kim et al.AND / LEAVING CONSUMER SELF-EMPLOYMENT SCIENCES RESEARCH JOURNAL Factors Influencing the Likelihood of Leaving Self-Employment in Korea Sung-Hee Kim Yeojoo Institute of Technology, Korea Deanna L. Sharpe University of Missouri–Columbia Hye-Yeon Kim Cheju National University, Korea Self-employed business owners in Korea are likely to be male with at least a high school education and no young children in the home. Evidence is that businesses of the self-employed in Korea are small, primarily focused on sales and trade, and financially vulnerable. Willingness to leave selfemployment is less likely for those who are male, enjoy work, have high household expenditures, are satisfied with the work of the business, and are optimistic about the future potential of their business. The rate of self-employment in Korea has been gradually increasing. Twenty-eight percent of all workers were self-employed in 1990. In 1999, 28.8% of all workers were self-employed. If only non-farm workers are considered for the same years, the proportion of selfemployed is 21.8% and 25.0%, respectively. If unpaid family workers are considered (they represent 10.3% of all workers and 6.1% of all non-farm workers), the rate of self-employment is about 40% of all workers and 31% of non-farm workers (National Statistical Office of Korea, 1999). Traditionally, self-employment in Korea has conveyed an image of a business that is relatively small, has inadequate finances, and is not well organized. Recently, however, several economic and social factors have fostered a more positive image of self-employment. In the 1980s, employers in large firms in Korea introduced early retirement plans to reward workers while reducing high operating costs. As a result, workers changed the way they thought about and engaged in employment. They no longer expected to hold one job over the Family and Consumer Sciences Research Journal, Vol. 30, No. 4, June 2002 554-569 © 2002 American Association of Family and Consumer Sciences 554 Kim et al. / LEAVING SELF-EMPLOYMENT 555 working years. Workers who retired early but who still wanted to work could get another job or they could start their own business using their retirement benefits to finance the endeavor. The term venture enterprise was introduced toward the end of the 1980s to describe new high-risk and high-return businesses that have helped to change both industry and information technology in Korea. The employers and employees in these enterprises are generally regarded as young, highly educated, capable, creative, and pursuing a high level of self-actualization. These new venture enterprises numbered on average 2,042 per month in 1998, 4,934 in 1999, and 9,331 in 2000 (Korea’s Ministry of Finance and Economy, 2001). Growth of these venture enterprises has sparked interest in self-employment among young workers. During the Korean economic crisis of 1998, many businesses closed and workers lost jobs and benefits. Finding employment was difficult. In February 1999, the unemployment rate was 8.6%, up from 2.6% in November 1997. Self-employment, in effect, provided a safety net for workers who otherwise would have been unemployed (Ryew & Choi, 1999). This economic crisis affected labor force mobility. Following the crisis, the rate of leaving salary employment for selfemployment has decreased while the rate of leaving unemployment for self-employment has increased. At the same time, it has become more difficult to leave self-employment for a salaried job (Ryew & Choi, 2000). Taken together, early retirement, changing concepts of work, growing appeal of self-employment, and a changing Korean economy have contributed to the growth of new businesses in Korea. In the year 2000, the number of business starts as reported by an organization of corporations in eight Korean cities was 3,455 per month on average, a 35% increase over the 2,558 per month averaged in 1999 (Korea’s Ministry of Finance and Economy, 2001). Although self-employment has expanded opportunity for workers and has helped many to maintain labor force participation, it is a risky endeavor. The Korean government and business community provides little economic support for establishing a business. Compared with salary income, self-employment income has greater fluctuation and there is the ever-present risk of business failure. Pensions, insurance, and other employment-related benefits are limited for selfemployed workers. These negative features of self-employment can influence business owners to leave self-employment. Also, some new 556 FAMILY AND CONSUMER SCIENCES RESEARCH JOURNAL businesses fail. The number of “dishonored businesses” was 207 in 1999 and 233 in 2000, reflecting a failure rate of around 10%. Business failure can lead to unemployment for the former business owner, decreasing family income and increasing family stress. At present, little is known about self-employment in Korea. The purpose of this study is to examine the characteristics of selfemployed workers and their businesses in Korea and to explore the willingness of self-employed individuals to leave self-employment. Self-employment is beginning to gain greater respect as a career option and to play a larger role in the Korean economy. When selfemployment facilitates labor mobility and expands opportunity, national economic productivity is enhanced. Recent changes in the Korean labor market, however, have reduced opportunities for formerly self-employed workers to return to salaried work. Consequently, leaving self-employment can mean unemployment, decreased family income, and increased family stress. In light of these issues, it becomes important to examine the factors associated with willingness to leave self-employment. LITERATURE REVIEW The labor economics literature suggests there are two roads to selfemployment. Moore (1982) argued that the workers who are relatively less capable become the self-employed in a divided labor market. According to Moore, self-employment is like a “bottom tier” of employment. In a labor market where workers are differentiated by various abilities and characteristics, self-employment would be the form of employment for workers who were not successful in obtaining employment by others. Evans and Leighton (1989) also suggested that less capable workers were likely to be self-employed. On the other hand, Blau (1987) and Lucas (1978) maintained that selfemployment is the result of a highly capable individual’s deciding to be self-employed to get more rewards and to realize personal potential. Thus, two contrasting images of self-employed workers are presented. The importance of self-employment has been only recently recognized in Korea. Limited literature on self-employed workers in Korea exists. In the sociological literature, Kim (1986) and Choi (1991) were interested in the relationship between self-employment and social Kim et al. / LEAVING SELF-EMPLOYMENT 557 class. These studies regarded self-employed workers, especially nonfarm self-employed workers, as middle or below middle class but different from blue-collar workers. In the field of management, the characteristics of small businesses have been of interest. Although there are those who own large firms, self-employment is typically associated with having a small business. Small businesses are likely to be financially vulnerable because of such obstacles as smaller funds to start, high costs to produce goods, and difficulty getting bank loans (Korea Federation of Small and Medium Business, 1999; Yong, 1998). Park (1988) found that the typical self-employed worker is likely to have a small business that is financially vulnerable and not well organized. Specifically, among the self-employed with a small business, workers had lower educational levels, their partners were unemployed, and they did not have sufficient funds to effectively operate the business. Also, single mothers or female heads of household were more likely to be self-employed. He concluded that the “small selfemployed” can be characterized as someone who owns a business that can be started without much money, ability, or special skills, and who can accept lower income and longer working hours. More recent research indicates that some characteristics of selfemployment may be changing. Some labor economists have examined the flow of self-employed workers into and out of the labor market. For example, Kum & Cho (2000) studied the decision to be selfemployed. Using the 1998 Korean Labor Panel Study (Korean Labor Institute, 1998), their study showed that self-employed workers in Korea who voluntarily left salaried work generally had high levels of human capital and income. This type of self-employed worker stood in contrast to those who became self-employed because they were less capable workers, making it difficult for them to get salary jobs or because their reservation wage was too high relative to the available wages and salaries. By using National Statistical Office data, Ryew and Choi (2000) reported that the rate of entering into self-employment was highest for those in their late 30s and lowest for those around 55 years old, with an upward trend after that age. The rate of ceasing self-employment was 50% before age 25, 7.5% in the late 40s, and then 16% after age 65. As Quinn (1980) pointed out, this trend indicates that self-employed workers leave their employment more slowly than salary workers do. In contrast, Evans and Leighton (1989) suggested that the probability of a salary worker’s entering self-employment does not relate to age. 558 FAMILY AND CONSUMER SCIENCES RESEARCH JOURNAL Ryew and Choi (2000) found that among non-farm female workers, self-employment was more likely to be found among those who were primary earners or had a partner; those who lived in town; those who were hired as daily or temporary workers; and those who were in wholesale or retail trade, restaurants or hotels, or construction or service work. Age and education level were not related to entering selfemployment. METHOD Conceptual Framework The Sustainable Family Business Research Model proposed by Stafford, Duncan, Danes, and Winter (1999) provides the conceptual framework for this study. In this framework, both the family and the business are portrayed as purposeful social systems that act to transform resources and constraints into achievements that are consistent with the goals of each system. Business sustainability, it is proposed, results from the combined influence of successful achievement in the family and business systems as well as suitable response to disruption in the pattern of interpersonal and resource transactions within and between the family and business systems. Whereas interface between the family and business systems is an integral part of the model, variance in the size of that interface is also recognized. The greater the separation between family and business, the smaller is the overlap between the systems. It is reasonable to assume that staying in business (business sustainability) is an objective of the self-employed worker. To reach this objective, resources such as the human capital stock and economic resources of the self-employed worker are utilized in both the family and business systems. Task accomplishment in the family or business system can be constrained. For example, the need to care for a child younger than age 6 can limit time available for other family or business tasks. Controlling for business characteristics, a selfemployed worker’s attitude and satisfaction with various aspects of his or her business may also constrain the ability to achieve success, especially within the business system. The level of success achieved in both the family and the business system, in turn, can influence willingness to leave self-employment. Kim et al. / LEAVING SELF-EMPLOYMENT 559 Data and Sample Data for this study come from the 1999 Korean Household Panel Study. The Daewoo Economic Research Institute in Seoul, Korea, collected the data (Daewoo Economic Research Institute, 1999). This national survey, conducted yearly since 1993, was designed to obtain information about the social and economic activities of individuals and households in Korea. The survey sample of 6,320 was selected by multistage stratified random sampling techniques. This study focused on the 713 self-employed workers in the national survey. Householdlevel data were obtained from households that contained one selfemployed worker. Personal-level data were obtained from the selfemployed worker. There were 590 male self-employed workers and 123 female self-employed workers. Model Logistic regression was used to learn the odds of being willing to leave self-employment (Demaris, 1992). The model used in this study was Prob[yi = 1] = exp(di)/[1 + exp(di)], where y indicates willingness to leave self-employment, and di is a vector of self-employed worker and business characteristics. This is an exploratory study. Following the conceptual framework, variables were selected on the basis of the literature and the information available in the original data collection. The definition and measurement of the variables used in this study are shown in Table 1.1 The dependent variable was willingness to leave self-employment. Although a measure of actually leaving self-employment would have been preferred, that information was not available in the data. For this study, it is assumed that business owners who indicate that they are willing to leave self-employment would actually do so if given the opportunity. On the basis of the conceptual framework and existing literature, certain resources and constraints were hypothesized to be associated with willingness to leave self-employment. Resources consisted of human capital and economic resources. The self-employed worker’s age (as a proxy for experience) and education (measured in years) were measures of human capital. Workers with more life and work 560 FAMILY AND CONSUMER SCIENCES RESEARCH JOURNAL TABLE 1: The Definition and Measurement of the Variables Variable Dependent variable Independent variables Resources Human capital of self-employed worker Age Education Economic resources of self-employed worker Spouse not employed full-time Annual household expenditure level Constraints Time of self-employed worker Children younger than age 6 in the home Attitude toward work Self-employed worker satisfaction with: Income of the business Working hours of the business Future of the business Work itself Business characteristics Business owner gender Business location Type of business Construction Wholesale and retail trade Transport, storage, and communication Other Definition and Measurement Are you willing to quit being self-employed? 1 = yes; 0 = no Age measured in years Education measured in years 1 if yes; 0 otherwise Annual household expenditures measured in won (unit = 10,000 won/year) 1 = yes; 0 = no Do you agree or disagree with the statement that to work hard is to enjoy life? 1 = do not agree 3 = neutral 5 = strongly agree 1 = very unsatisfied 3 = neutral 5 = very satisfied 1 = very unsatisfied 3 = neutral 5 = very satisfied 1 = very unsatisfied 3 = neutral 5 = very satisfied 1 = very unsatisfied 3 = neutral 5 = very satisfied 1 = male; 0 = female 1 = non–home based; 0 = home based 1 if yes; 0 otherwise 1 if yes; 0 otherwise 1 if yes; 0 otherwise 1 if yes; 0 otherwise Kim et al. / LEAVING SELF-EMPLOYMENT 561 TABLE 1 Continued Variable Number of employees Annual total sales of the business Annual net income of the business Definition and Measurement Number of people employed in the business, including family, relatives, and other employees Sales measured in won (unit = 10,000 won/year) Income measured in won (unit = 10,000 won/year) experience and with higher levels of education would be expected to be less willing to quit self-employment. Economic resources were measured as spouse employment and household expenditure level. Self-employed workers whose spouses were not employed full-time might not have the financial resources to weather a downturn in the self-employed business. In this study, household expenditures were a proxy for household income levels. The permanent income hypothesis (Friedman, 1957) suggests that annual total expenditures represent life span consumption patterns better than annual income, especially when annual income is variable as it often is with selfemployment. Lower levels of economic resources were expected to be positively associated with willingness to quit self-employment. In this study, constraints focused on the presence of young children in the home, attitudes of the self-employed toward work, and satisfaction of the self-employed with various aspects of their business. Young children in the home can restrict time available for work. In Korea, self-employment has typically been associated with running a small business that has limited funding and long work hours. Having to care for a young child can be an interference in a business with these characteristics. Thus, it was expected that, all else equal, those with young children might be more willing to quit self-employment. Favorable attitudes toward work (agreeing with the statement that the reason for working hard is to enjoy life) and satisfaction of the owner with the business would likely be negatively associated with willingness to quit self-employment. In the logistic regression, several variables were used to control for differences in business characteristics (Avery, Haynes, & Haynes, 2000). These variables included gender of the business owner, business location (home based or not), 562 FAMILY AND CONSUMER SCIENCES RESEARCH JOURNAL TABLE 2: Willingness to Remain Self-Employed and Reasons for Quitting (N = 713) Whether or not self-employed will quit No Yes Reason willing to quit For more income Not fit to my personality Health Child care and household work Miscellaneous Frequency Percentage 608 105 85.3 14.7 46 28 20 3 8 43.8 26.7 19.0 2.9 7.6 type of business (construction; wholesale and retail trade; transport, storage, and communication; and other). In addition, the number of employees, and annual total sales, and net income of the business are reported in the descriptive statistics. FINDINGS AND DISCUSSION Table 2 reports characteristics of those who were and were not willing to leave self-employment. Most respondents (85.3%) were not willing to leave self-employment. This result supports Ryew and Choi’s (2000) viewpoint that in Korea, self-employment is relatively stable. Among those who said they were willing to leave selfemployment, income was a main reason. Self-employment seemed not to guarantee enough income. Personality and health were also important reasons to leave self-employment. Selected characteristics of self-employed workers are reported in Table 3. On average, self employed workers were male, high school graduates, and were in their 40s. Also, they were likely to have no children younger than six in their households. The average annual household expenditure level was about 20,060,000 won, which is approximately 20,000 U.S. dollars.2 Self-employed workers who were willing to leave self-employment were significantly more likely than their counterparts to be female, have children younger than 6 in their households, have a lower level of household expenditures, and disagree with the statement that the reason to work hard is to enjoy life. TABLE 3: Characteristics of the Sample (N = 713) Total Sample Categorical Variable General characteristics of self-employed worker Gender Male Female Education level Less than middle school High school More than college Presence of children younger than age 6 in the home Yes No Employment status of spouse Full-time Not full-time Continuous Variable 563 Age (years) Education (years) Attitude toward work (5-point scale) Annual household expenditure level (10,000 won) *p < .10. **p < .05. Frequency Percentage Not Willing to Leave Self-Employment Frequency Percentage Willing to Leave Self-Employment Frequency Percentage Chi Square 590 123 82.7 17.3 511 97 84.1 15.9 79 26 75.2 24.8 4.866* 210 356 147 29.5 49.9 20.6 176 310 122 28.9 51.0 20.1 34 46 25 32.4 43.8 23.8 1.891 229 484 32.1 67.9 185 423 30.4 69.6 44 61 41.9 58.1 5.410* 627 86 87.9 12.1 539 69 88.7 11.3 88 17 83.8 16.2 1.979 M SD t-Test Value M SD M SD 43.28 11.39 3.38 9.23 3.15 1.13 43.21 11.38 3.43 9.07 3.17 1.11 43.70 11.43 3.12 10.14 2.99 1.22 –0.462 –0.152 2.373** 2,006.39 1,047.07 2,038.30 1,068.20 1,822.90 899.10 2.199** 564 FAMILY AND CONSUMER SCIENCES RESEARCH JOURNAL Table 4 presents the characteristics of the businesses owned by the self-employed. In this study, the businesses of the self-employed on average had two employees, generated 24,000,000 won (U.S.$24,000) of net income per year, and had about 10 working hours 3 per day. These findings suggest that most businesses of the selfemployed are small, generate relatively low income, and require long hours. Those who had fewer employees were more willing to leave self-employment, a finding that implies that businesses that employed more workers were more successful and that business owners may have felt a greater responsibility to keep the business running. For those willing to leave self-employment, satisfaction with various aspects of the business was relatively lower than for those not willing to leave self-employment. Those who were willing to leave self-employment were likely to be relatively dissatisfied with income, working hours, the future of their business, and the work itself. Interestingly, for both groups of self-employed workers, satisfaction levels were highest for the work itself. Also, if the type of business was wholesale and retail trade, leaving self-employment was more likely as compared with other types of business. Results of logistic regression on the willingness to leave selfemployment are shown in Table 5. Human capital of the selfemployed worker as measured by age and education did not have a significant effect on willingness to leave self-employment, similar to the results of Evans and Leighton (1989) and Ryew and Choi (2000). These findings, however, stand in contrast to the conclusion of Kum and Cho (2000) that self-employed workers in Korea were divided into two groups—capable workers and inevitably self-employed workers. Economic resources play a significant role in the willingness to remain self-employed or not. Willingness to quit self-employment was positively associated with not having a spouse employed fulltime but negatively associated with higher levels of household income as proxied by household expenditures. Those who had children younger than age 6 in their households were likely to leave self-employment. This result can imply that when a self-employed business is in the early start-up stage, time demands of the business and care of young children can conflict. Care for a young child is difficult when the parent must work longer hours as a self-employed worker. Yong (1998) reported that the work schedules of members of small business did not provide consistent days off from TABLE 4: Self-Employed Business Related Characteristics Total Sample Categorical Variable Business location Home based Not home based Type of business Construction Sales and trade Transport Miscellaneous Continuous Variable Characteristics of the business Number of employees Annual total sales of business (10,000 won/year) Annual net income of business (10,000 won/year) Respondent satisfaction with aspects of business Income Working hours Future of the business Work itself 565 *p < .10. ***p < .001. Frequency Percentage Not Willing to Leave Self-Employment Frequency Percentage Willing to Leave Self-Employment Frequency Percentage Chi Square 295 418 41.4 58.6 248 360 40.79 59.21 47 58 44.76 59.24 0.583 79 331 91 212 11.1 46.4 12.8 29.7 72 271 77 188 11.8 44.6 12.7 30.9 7 60 14 24 6.7 57.1 13.3 22.9 7.202* t-Test Value M SD M SD M SD 2.3 4.66 2.44 4.99 1.53 1.56 11,339.13 21,042.10 11,414.12 21,002.38 10,878.54 21,396.98 0.219 2,369.23 1,503.05 2,394.45 1,347.68 2,225.32 2,198.34 0.763 2.51 2.77 2.82 3.08 0.86 0.96 0.88 0.72 2.57 2.83 2.89 3.15 0.85 0.94 0.85 0.65 2.13 2.40 2.35 2.68 0.84 1.04 0.93 0.93 3.537*** 4.888*** 3.959*** 5.634*** 4.969*** 566 FAMILY AND CONSUMER SCIENCES RESEARCH JOURNAL TABLE 5: Results of Logistic Regression Variable Parameter Estimate Standard Error 0.021 0.061 0.016 0.051 0.945*** 0.000** 0.349 0.000 0.684*** –0.277** 0.271 0.118 –0.147 –0.191 –0.516*** –0.589*** 0.177 0.143 0.180 0.204 Resources Human capital of self-employed worker Age Education (years) Economic resources of self-employed worker Employment status of spouse (regular job omitted) Household expenditure Constraints Time Presence of children younger than 6 Attitude toward work Satisfaction with: Income from business Working hours in business Future of the business Work of the business Business characteristics Self-employed worker male Business is not located in home Type of business (construction omitted) Wholesale and retail trade Transport, storage, and communication Other –1.294*** 0.003 0.503 0.276 –0.745 –0.203 –0.616* 0.506 0.396 0.328 Intercept –2 log likelihood Concordant –3.058** 90.057 78.3% 1.287 *p < .10. **p < .05. ***p < .001. the business. This burden of long or irregular working hours was worse when young children were in the home. Self-employed workers who agreed that hard work contributed to enjoyment of life were less willing to leave self-employment. Satisfaction with future of the business and work of the business also had a significant effect on the willingness to leave self-employment. Those who believed positively in the future of their business and who were satisfied with the work of the business were less likely to leave selfemployment. Choi (1991) reported in his study that self-employed workers were worried about the future of their business; however, the subjective satisfaction with their business was relatively high. Kim et al. / LEAVING SELF-EMPLOYMENT 567 Among the business-related variables, willingness to leave selfemployment varied according to gender of the business owner and type of business. Specifically, male business owners were less likely than female business owners to be willing to leave self-employment. Although no difference in willingness to quit self-employment was found among most business types, those who had a business classified as “other” were less likely to be willing to quit as compared with those in the construction business. It is noteworthy that location of the business had no effect on willingness to leave self-employment, because research has found that a home-based business is favorable to household management (Heck, Stafford, Winter, & Hennon, 1993). SUMMARY AND CONCLUSION This study examined the characteristics of the self-employed in Korea, their businesses, and the factors related to the willingness of workers to leave self-employment. A conceptual framework based on Stafford et al.’s (1999) Sustainable Family Business Research Model was proposed to guide the research. The profile of self-employed workers in this study provides some support for the traditional image of self-employment. That is, support was found for the idea that the self-employed have small businesses that are financially vulnerable and not well organized, and they work longer hours. This image is in contrast to the concept of the self-employed as capable young workers achieving high rewards as promoted by the venture enterprises. In this study, neither age nor years of education was significantly associated with willingness to leave self-employment. The self-employed workers who were less likely to leave selfemployment seemed to fit the image of “inevitable” self-employed workers. Since the economic crisis of 1998, it has been difficult for new workers or former self-employed workers to get wage and salary jobs (Ryew & Choi, 2000). To leave self-employment requires the opportunity to secure other employment. If such employment is not readily available, one might not be able to leave self-employment, even though he or she desires to and even though the work situation in selfemployment is not good. When self-employed workers view the future of their business positively and are satisfied with the work of the business, the problems associated with self-employment can be endured. 568 FAMILY AND CONSUMER SCIENCES RESEARCH JOURNAL Study results related to gender of business owner, presence of children younger than 6, household expenditure level, and some business-related variables, suggest that some public policy directives may be needed to help certain self-employed workers. Specifically, for those self-employed workers in the bottom tier of the labor market (the inevitable self-employed), those who are female and who have younger children and low finances may need support. For this type of worker, leaving self-employment would almost certainly mean unemployment. The resulting decline in family income could put family members at risk of not being able to meet basic needs because Korea does not have a social welfare system comparable to that of the United States. Training programs in business operation provided by the government or the business community, development of special funds that could be used to support those female self-employed with lower levels of human and economic capital, or child care centers that would serve those self-employed workers who have longer working hours and low finances could help this group remain in selfemployment and out of the ranks of the unemployed. NOTES 1. Monetary measures in this study were scaled to facilitate empirical estimation of the model. When units of measure are large relative to other variables, conversion of the model under maximum likelihood can be difficult to achieve. Scaling addresses this problem. 2. One thousand Korean won was equivalent to U.S.$1.00 in 1997. 3. 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