ⓒ KBS News

South Korea’s sluggish employment growth shows no signs of improving. According to data released by government-run Statistics Korea on September 12, the number of unemployed people last month hit the largest ever since the aftermath of the Asian financial crisis in the late 1990s. Here is Choi Bae-geun(최배근), economics professor at Konkuk University, to examine the nation’s ever-worsening job market. 

Only 3,000 new jobs were created in August, continuing the similarly discouraging performance of the 5,000 jobs added the previous month. This is a stark contrast to last year, when 300-thousand jobs were added each month on average. The figure decreased to 100-thousand in February this year and shrunk to 5,000 in July and 3,000 in August. The monthly job growth of under 10-thousand is quite shocking, given that adding hundreds of thousands of new jobs was considered normal in previous years. 

Last month, the number of unemployed stood at 1.13 million, 130-thousand more than a year ago. It has stayed above 1 million for eight months running, the longest streak of continuous high unemployment since 1999 amidst the Asia financial crisis. Additionally the number of employed workers has fallen sharply, as Professor Choi pointed out. Sadly, Koreans in their 40s have lost their jobs at the fastest pace in 27 years. 

The significant decline of jobs for those in their 40s, who are the primary workforce, is a pretty serious problem. There are few, if any, job policies tailored to this particular age group. Many 40-somethings have actually been employed, but 157-thousand people in the same age group lost their jobs in August. The trend is spreading to those in their 30s, with workers in their late 30s seeing nearly 80-thousand jobs disappearing in the same month. The declining number of jobs for those in their 30s and 40s, the most active participants in the economy, is one of the depressing examples of the recent deterioration in employment. 

The number of employed people in their 30s has fallen for 11 consecutive months dating back to last October, while the youth unemployment rate has hit 10 percent. In contrast, 270-thousand people aged 60 or older have found new jobs. That’s because the government increased the number of senior workforce positions, and a growing number of retirees are returning to work or starting their own businesses. But workers in their 40s and younger, who are considered to be the most economically active, have seen their opportunities disappear. Professor Choi cites a downturn in the manufacturing industry as one of the primary factors behind the worsening employment numbers.

The South Korean economy depends heavily on the manufacturing industry, which comprises the nation’s core businesses. Due to the setback in the manufacturing sector, temporary jobs at partner companies of manufacturers are shrinking. The difficulty is dealing a blow to the self-employed, especially small business owners without employees, and also has a chilling effect on the real estate market, with many building cleaners and janitors losing jobs. These problems are not separate, as a decline in the manufacturing sector has downstream effects. 

South Korea’s manufacturing industry is struggling. GM’s restructuring of its Korea business, amidst weak regional and domestic demand, led to vast numbers of employees laid off. The shipbuilding industry also continues to struggle. Shipbuilding industrial production has slipped a staggering 40 months in a row, indicating how serious the situation is. As expected, restructuring in the industry has left many laborers out of work, and this is particularly damaging to regional economies. In the industrial city of Ulsan and its metro area, for example, the number of employed workers has dropped nearly 10 percent over the past three years. In Geoje (거제), where the shipbuilding industry accounts for a large portion of the local economy, the unemployment rate hit 7 percent. As part of efforts to expand the number of jobs, the government is re-appropriating resources to these areas. 

If jobs are not created in the private sector, the government cannot help but act as a sort of relief pitcher. The government should not spend recklessly, of course, but it must inject funds actively, when necessary. Let me put it this way. A dam collapsed, and rushing water floods a village. The first thing to do is to save people from drowning. Likewise, the government needs to use its emergency funds first to add more jobs in the public sector or strengthen the social safety net. That’s what the government is for. Then, it should rebuild the dam, that is, recreate the industrial ecosystem. The government and the business community should join forces to create a new industrial ecosystem as a fundamental solution, with the manufacturing industry declining. In this vein, the government’s injection of funds is inevitable, at least for now. 

The Moon Jae-in government in South Korea has spent over 40 trillion won or roughly 36 billion US dollars on job creation since its inauguration in May last year. It will also allocate a considerable portion of its budget for next year on employment and income distribution. The budget endorsed by the Cabinet last month calls for 470 trillion won or about 420 billion US dollars in spending for 2019. Of that, 23.5 trillion won or 21 billion dollars will be used for job creation alone, a 22 percent hike from this year. It represents the biggest one-year expansion ever. The government plans to use this money to support youth employment and secure more jobs in social and public services. In doing so, it hopes to create more than 900-thousand jobs next year. But Professor Choi says that throwing money at the problem is a temporary fix, and more fundamental changes will be necessary. 

The ultimate solution is to improve the way industry is structured. That is to say, other measures will end up being just short-term prescriptions. It is necessary to create new industries that are able to generate new jobs to replace those lost in manufacturing, although the process may take time. Without the re-establishment of the industrial ecosystem, the situation would only continue to worsen. So, rather than cover up cracks in the foundation with paint, the nation should come up with a permanent solution, no matter how long it takes and how painful it may be. Future governments will face the same problem. So both the ruling and opposition parties should put their heads together to draft effective measures, which should be carried out properly and consistently under the next administration. 

The global economy is shifting away from the major industries that once led the Korean economy, and the nation is struggling to find a solution. This is a driving force behind employment stagnation. It is still not too late to devise ways, from a long-term prospective, to secure new growth engines and increase quality jobs.