Price inflation is hitting mom-and-pop businesses particularly hard after they were already battered by the coronavirus pandemic.
Even restaurants and other small food businesses that weathered the minimum-wage hike by laying off part-timers and clung on through lockdown by switching to deliveries are now succumbing to the rise in ingredient costs.
They cannot simply pass on the price hike to their customers. Kim Young-kyu, who runs a Japanese-style pub in Yongsan, said, “Most of the customers who came even during the pandemic are regulars, so I can’t just hike my prices.”
To make matters worse, mom-and-pop businesses stand to lose the deposit on their rent if they simply shut up shop, and many still have to repay loans they took out to open their business in the first place.
Lee Sang-bong, who has run a bar in Daechi-dong for six years, is one example. “Sales have now plummeted from W30 million to W7 million a month,” Lee said (US$1=W1,149). But Lee has to repay a W90 million loan he took out when he started it. “I should’ve closed it earlier” before losses have snowballed, he admits.
Instead, many are taking out even more loans to stay afloat. Loans to mom-and-pop business owners surged from W700 trillion in the first quarter of last year to W841 trillion in the second quarter this year, and the amount is probably much higher if loan sharks are included.
Sung Tae-yoon at Yonsei University said, “The government says it will provide more coronavrius relief to 88 percent of the public, and it has to make sure that mom-and-pop businesses get it. A surge in loans to small business owners could threaten the health of our economy.”
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