Certified Social Enterprises in Korea: Historical Development, Current Status, and Typologies Based on Social and Economic Performance

Background and Purpose

Faced with slow economic growth, high levels of unemployment, and rising poverty and inequality, a growing attention has been paid to the social economy throughout the advanced economies. This is not an exception in Korea, and the social economy sector is rapidly growing as strategies for social service expansion and job creation. This study explored historical development and current status of certified social enterprises, one of the major actors of the Korean social economy. This study further empirically developed a typology of certified social enterprises based on various social, economic performance indicators.

Methods

Based on the extensive review of literature, we first discussed historical development of certified social enterprises in Korea. Next, using the panel data on certified social enterprises from 2007 to 2016, characteristics as well as economic, social performance of certified social enterprises were explored. Third, we developed an empirical typology of certified social enterprises using latent class analysis (LCA) based on various social, economic performance indicators. Factors associated with each type were further investigated utilizing the multinomial logit regression.

Results

The extensive review of literature on the development of social enterprises in Korea revealed that the development has three distinctive features: 1) job creation strategy, 2) social service expansion strategy, and 3) strong government intervention (the government-driven model). Next, a series of descriptive analyses revealed that the number of certified social enterprises increased to 1,905 (as of 2017), and a majority of them were work-integration types. Over 60% of employees were in the disadvantaged groups. The average monthly wage for the disadvantaged and non-disadvantaged employees were 1,347,000 KRW and 1,827,000 KRW, respectively. The average monthly working hours for the disadvantaged and non-disadvantaged employees were 34.1 hours and 35.2 hours, respectively. In terms of the sustainability in the business sector, although total revenue were growing, a majority of certified social enterprises showed deficit in operating profits. Other characteristics and current status of certified social enterprises were also discussed in detail. Third, findings from the latent class analysis indicated that certified social enterprises were classified into three distinctive groups: 1) high performance type, 2) high performance in the employment of disadvantaged employees, and 3) general type. Characteristics associated with each type were further explored.

Conclusions and Implications

Certified social enterprises, one of the major actors in the Korean social economy sector, have been substantially growing with strong government interventions as a strategy for social service expansion and job creation. However, there is still much room for improvement, especially in terms of the quality of employment, and long-term sustainability in the business sector. Typologies based on economic, social performance indicators showed that, although social enterprises pursue both social and economic purposes, there could be trade-offs between the two. Policy and research implications were further discussed.