Lethargic Job Market Causes Strains
By Kim Tae-gyu
Staff Reporter
Unlike the brisk stock market, general observations have shown that job markets respond slowly to the economic cycle ― job creation jumps only when the economy recovers in a full-fledged manner.
This time around, however, experts worry that the response is too slow because unemployment rates both at home and abroad have not shown any clear signs of tailing off.
Statistics Korea, the new name for the country's statistical office, said earlier this week that the unemployment rate was 3.7 percent in August, up 0.6 percentage points from the corresponding period last year.
The reality might be more serious because 178,000 adults gave up searching for work last month, up by 62,000 from a year ago. They are excluded in the calculation of the jobless rate, thus deflating the figure.
The youth jobless rate could not be worse as the number of jobs for 20- and 30-somethings fell to 9.5 million last month, the lowest in almost two decades since April 1990.
Things are similar in the U.S., where the jobless rate soared to 9.7 percent in August. The world's largest economy has eliminated around 7 million from payrolls since the global financial problems started.
When contacted, however, Statistics Korea warned against hasty pessimism as the labor market is a lagging indicator ― its movement tends to follow that of overall economic activities.
"The job market is one of the final areas where the effect of economic recovery is felt. Although Korea chalks up a big amount of trade surplus, exports are still failing to regain last year's level," an official said.
"We do not worry too much about the labor market. We need to take a wait-and-see attitude for the time being as the economy has just started to bounce back," he said.
In response, Korea Labor Institute researcher Hwang Soo-kyeong flatly rebuffed such a rationale.
"In the past, the labor market was a lagging indicator. But with the introduction of the temporary workers based on subcontracting or outsourcing contracts, it no longer lags that far behind the economy," Hwang said.
"In other words, employers hire or sack workers instantly in accordance with their need. In that sense, the sluggish job market is a long-term problem that will be hard to deal with. The woes on the jobless recovery materialize locally and globally."
Hwang added that the public employment projects ― estimated to produce more than 250,000 jobs ― cannot be a cure.
"As soon as the government stops the projects, all of the quarter million would disappear. By nature, such attempts are just stopgap measures, which cannot be a long-term solution," she said.
Yoo Jang-hee, professor emeritus at Ewha Womans University, pointed out that the lukewarm job market weighs on the country since economic recovery took place in the manufacturing industry.
"The recent turnaround has been spearheaded by producers of cars, memory chips, info-tech items or home appliances, which typically don't need much of a workforce," Yoo said.
"This led to a lack of new jobs. In order to fully get over the economic downturn, we are required to reduce the unemployment rate. And to do this, the administration needs to come up with specific measures."
As a viable option, Yoo said that the services sector needs to be stimulated.
"Services in IT, finance, education, medicine, construction and distribution will generate a great number of jobs. The government is required to boost them," Yoo said.
"For one, incentives can be given to them in capital-raising or taxation. In addition, a state-backed research center must be established to make an in-depth study on the services industry."