Social Enterprises: A Growth Engine to Stem Korea’s Unemployment Crisis?

While Korea’s development success is renowned, less known are its current development challenges. These include: an aging population, gender inequality, growing disparity, and a slowing economy. Eight out of 10 Korean adults said in a recent poll they would leave Korea if they could, with the highest percentage in their 30s followed by those in their 20s. Coupled with the highest suicide rates in the OECD, Korea is being referred to as “Hell Joseon,” a reference to a feudal past during the Joseon dynasty when Confucian hierarchy dictated one’s life path to serfdom or prosperity.

The “Miracle on the Han” has given way to a youth unemployment crisis and an economic slump. While the formula for prosperity in Korea previously meant attending an elite college, finding a job at a large conglomerate, and having a family, today’s youth struggle to find any employment – the jobless rate for youth reached 12.5 percent in February, the highest in 15 years. Although net national income increased from $21,286 in 2006 to $27,119 in 2014, an estimated increase of 27.4 percent per capita, the proportion of young breadwinners (34 years or under) who live below the poverty line increased from 10.7 percent in 2006 to 12.2 percent in 2014, despite their high levels of education and academic qualifications. And problems of unemployment and poverty are not reserved for youth: the elderly poverty rate in South Korea is also the highest among OECD countries.

Korea’s economic success was largely built upon its strong manufacturing base, but with faltering exports and declining global demand, industrial output has dropped and the economy had a 12.2 percent on-year drop in exports. Large companies are firing their employees, and businesses are reluctant to recruit in the current economic climate. When they do hire workers, companies are offering short-term contracts, leading to more job instability, especially for youth whose first jobs often set the course for their future careers.

To create new jobs and help kickstart the slowing economy, South Korea is turning to social enterprises as a potential growth engine. The Korean Social Enterprise Promotion Act was signed in 2007 to create a social sector that generates social change. There are now over 1,550 certified social enterprises, defined as “an organization that engages in business activities, including the production and selling of goods and services, while pursuing a social purpose to enhance the quality of life of the local community through the provision of social services and job creation for the disadvantaged.” The government supports certified social enterprises financially by providing partial wages to create jobs for young people. An estimated 3 percent of the Korean gross state product (GSP) is part of the social economy, a sector that encourages creativity for solving social challenges.

Entrepreneurship and innovation are at the core of South Korea’s economic policies, with the government actively investing in resources for start-ups and social ventures. The local social enterprise ecosystem has grown rapidly, with incubators, accelerators, and co-working spaces opening with support from the private and public sectors. The shift from a chaebol- (a term that refers to the country’s family-run conglomerates) dominated society to one of social enterprises and ventures is a marked shift that requires not only financial resources and support, but also a cultural shift for Korea, where “working hard” and “maintaining the status quo” had been the norm to encourage the rapid development of the country.

In addition to a growing domestic social sector, Korean social enterprises are also going global, with the support of official development aid from the Korean government. The new generation of businesses that are being developed have grown in scope and scale, targeting new social issues like energy conservation, an aging population, or learning disabilities domestically, and expanding internationally to target issues like unemployment and sustainable agriculture in developing countries in Southeast Asia. Approximately 27,923 people are employed within social ventures, with 15,815 coming from vulnerable or disadvantaged groups. In addition to certified social ventures, there are other enterprises that focus on social impact while also generating income.

The Merry Year Social Company (MYSC) is the first social impact-consulting firm in South Korea and helps to support the social enterprise ecosystem. MYSC bridges the corporate, government, non-profit, and social sectors to deliver social impact by strategically aligning, coordinating, and implementing business solutions to social issues through co-creation with clients. As one of the earliest impact investors in Korea, securing funds from UBS, MYSC has supported the growth of social enterprises through design thinking, idea generation, funding support, social enterprise competitions, business planning, and scaling.

One of MYSC’s impact investees is ByMom, a Busan-based social enterprise that manufactures indoor tents to conserve energy and actively employs the elderly in South Korea. 18,234 people own a ByMom tent globally, and they have estimated that use of their room tents increases indoor temperature by 2.4 degrees, conserving approximately 3,534,775 pine trees.

The creation of bottom-up social ventures encourages many jobs across different industries with varying levels of skills and needs. Bear Better provides employment opportunities for those with autism or other developmental disabilities. Started in 2012, the company has 80 employees that work to brew and roast coffee, make baked goods, and provide printing services. The employees also learn how to run the nuts and bolts of a business, and receive opportunities for social development and interaction.

These are just a few examples of the thousands of such creative ventures taking off in Korea with a focus on providing jobs while also addressing social issues. As social enterprises continue to scale within Korea, with support from government and the private sector, jobs and industry are being created to spur growth through the same innovation and creativity that once sparked the entrepreneurship of the chaebols.

Diana Won is a 2015-2016 Luce Scholar currently placed at Merry Year Social Company (MYSC) in Seoul. She can be reached at [email protected]. The views and opinions expressed here are those of the individual author and not those of The Asia Foundation or its funders.