Small businesses refer to businesses that employ one to four workers, and have generally been seen as reflective of the number of people setting up their own businesses.
KIF said that this year's decrease is different from past drops as it affected all age groups.
In the past, employment among people in their 30s tended to rise, but this year, that number also backtracked.
In addition, the institute said while in the past jobs for high school graduates and those with less schooling were affected, this year, the decrease hurt people with college degrees.
"The numbers are not indicative of people being fired from their work and have more to do with fewer people moving to establish their own businesses, even small ones," a KIF researcher speculated.
He said to cope with the situation, concerted effort must be made to help newly formed companies stay afloat and be able to hire new workers. (Yonhap)