Value context and insight. lkm@koreatimes.co.kr
Korea isolated from 'global jobs boom'
By Lee Kyung-min
By Lee Kyung-min
Korea is isolated from the boom in global employment, as its unemployment rate has continued to rise while most advanced economies have seen unemployment declining.
The employment data is the product of a number of factors but experts said the key culprit behind Korea's isolation was the Moon Jae-in administration's income-led growth strategy defined by rapid hikes of the hourly minimum wage and shorter workweek hours reduced to 52 from the previous 68.
They said the government should have had more thorough reviews and assessment on the potential pitfalls of their policies, particularly their impact on the country's labor productivity.
Moon's signature economic policy has been widely cited as the main reason companies are continuing their job freezes, largely regarded as a policy failure stemming from the government's excessive intervention in the market.
Xu Xiao Chun of Moody's Analytics said, “The minimum wage hike is one of many factors that have led to Korea experiencing a relatively high unemployment rate and weak employment growth.”
“It is a result of a combination of factors including a downswing in the tech cycle, slowing growth in China and the U.S.-China trade war. But given the current economic trends, it's not surprising to see some weakness in the domestic labor market,” he said.
Korea was left out when the Economist, an English-language weekly magazine, published a story about most of the rich world enjoying a “great jobs boom”.
In its May 25 edition, the magazine said that two-thirds of the members of the Organization for Economic Cooperation and Development (OECD), a group of mostly rich countries, are enjoying record-high employment among those between the ages of 15 and 64.
“This year Britons will work a record 55 billion hours, on current trends. Germany is enjoying a bonanza of tax revenue following a surge in the size of its labor force. Even in France, Spain and Italy, where joblessness is still relatively high, working-age employment is close to or exceeds 2005 levels,” it said.
The unemployment rate in the U.S. was 3.6 percent in April, the lowest in half a century. It dropped 1 percentage point from the 4.6 percent figure posted in March 2017.
Japan's figure was 2.5 percent in March 2019, 0.3 percentage points lower than 2.8 percent in March 2017. Germany's rate dropped to 4.9 percent in April 2019 from 5.8 percent in March 2017.
In contrast, Korea's jobless rate stood at 4.4 percent in April in 2019, a 0.3 percentage point increase from March 2017 when it was 4.1 percent. This was the highest since 2000 when it stood at 4.5 percent.
Korea's gloomy figure is explained partly or mostly by many owners of small enterprises shutting down or temporarily closing their businesses, Yun Chang-hyun, a business professor at the University of Seoul said.
“They may well conclude that they cannot simply make ends meet by following the state-set guidelines on increased labor costs, a shock to operating businesses,” he said.
In line with the figures is the recent rise in the number of people defaulting on loans.
“A substantial amount of loans are problematic assuming that they had taken out loans to finance their businesses or to simply sustain their livelihoods, " he said.
Sohn Sung-won, an economics professor at Loyola Marymount University in Los Angeles, said that those who voted Moon in as president are to bear the brunt.
“To be sure, the Moon administration's emphasis on distribution instead of growth is one of the reasons for the sluggish Korean economy,” he said.
“However, one must remember that the people voted him into Cheong Wa Dae knowing full well that his economic policies are designed to produce slower economic growth with an emphasis on more equitable income distribution,” he added.