Sign on the wall

I am not a doomsayer, and pretty optimistic about the future.  I have a small list of things the government can do to harm my business.  This is one of them.

I prefer not to give my list of things the government can do to curb the hagwon industry, some guy might actually read and implement them.  I am also not saying that this will “destroy” the hagwon industry, not quite there yet.  I am saying that it will have specific repercussions on MY business.

The services the hagwon industry offers to parents can be looked upon from various angles.  The main idea is we teach something to the kids, so they can master the skills to compete in the academics of South Korea.  Another service is babysitting.  It’s a perfect blend, keep your kids occupied and away from danger and fill that time with things they can use in the future, allowing you to make a buck away from the kids.

What people outside of Korea don’t know is that 1st grade elementary school kids finish around 2pm.  It gradually moves up as the years go on.

If you are a parent, you already have the question flash through your head.  ”What am I gonna do with my kid?”  Here comes the hagwon with their bus service.  The most profitable time period for me is between 2pm and 7pm.  That’s it.  All the other hours are just gravy.

Worst Case scenario

If the article is correct, it would effectively take away up to 60% of my revenue.

I have been talking to other people, trying to gauge the real situation, and what is going to be actually implemented.  What people say and what actually happens are two different things.  Nevertheless, I am worried about the direct consequences on my operations.

If the program would just be “Child Care”, it might not be a problem, the hagwon still provides “some” value to the time spent in class.  The article, though, doesn’t say that.  It says:

Starting next year elementary schools will provide after-school classes to first- and second-graders until 5 p.m. as part of an effort to expand after-hours child care programs within the public education system

They will provide “classes”.  Which is exactly what I, and many other hagwons are doing.

From a personal point of view, I have absolutely no problem with the implementation of this program.  As a business owner, I do.

Why is there no such  thing as an after school private education industry in other industrialized countries?  At least not in the extent we witness in Asia.  The main reason is the academic pressure on families to succeed, but also that schools don’t finish at 2 pm.  I don’t know about your school, but I seldom finished before 4.30 pm (except on Wednesday’s).

The fact that children have available time is an important part of the hagwon industry.

ESL teachers

When the worst happens, a drop in demand will also mean a drop in demand for NET’s.  Public schools have already severely cut into the English programs and let many people go without replacing them.  If this program is executed the way I think it will be executed, not many ESL teachers are going to remain in South Korea (compared to current levels).

Reality Check

The whole scheme is going to cost about $600M dollars.  That is a hefty sum.  Mostly because labor is an expensive part of the deal, and you need teachers to do more hours within the same time lapse, which simply translates into more teachers.

Public After school business are already a corrupted scheme, where greasy palms rule the day.  I’m sure many Korean parents are thinking exactly the same.  The trust level is not high, and they will have to increase their credibility before parents will be picking up on it.

Taxes.  Will the South Koreans swallow more taxes?  I don’t know about you, but I have a creepy feeling that, even though tax rates haven’t moved, I actually have been paying in real terms more and more taxes.  600.000.000/35.000.000 = 17$ per working adult.  Peanuts right. Assuming all 35.000.000 actually do pay taxes.

Social programs failures in the government. The South Korean government often tries new programs, but they often fail, mostly due to bad implementation or misguided concepts on what is actually required.

All in all, I am worried about the news, but I will play it cool and wait until the information becomes a little bit less propaganda and a little bit more real.