By Lee Hyo-sik
Staff Reporter
The South Korean economy has expanded at a solid pace since the 1997-98 Asian financial crisis. But its ability to create jobs has weakened, as the industrial structure has become more capital- and technology-intensive, with most labor-intensive industries shifting operations to China and other emerging economies. Also, high labor costs as a result of the rigid job market and strong protection for full-time workers have discouraged businesses from hiring new employees, analysts said.
According to the Ministry of Strategy and Finance, and the Organization for Economic Cooperation and Development (OECD) Monday, the world's 13th largest economy grew 5 percent in 2007 from a year earlier, the fifth highest rate among 29 OECD member economies, excluding Greece.
Slovakia saw its gross domestic product (DP) expand 10.4 percent, the highest in the OECD, followed by Poland with 6.7 percent and the Czech Republic with 6.6 percent. The U.S. economy grew 2.2 percent and Japan 2.1 percent, respectively.
Despite Korea's relatively strong growth last year, its employment-population ratio, a proportion of the employed to total population aged over 15, stood at 63.9 percent, up only 0.1 percentage point from 2006. The average employment rate among OECD member countries reached 66.6 percent, up 0.4 percentage points from a year ago.
Poland's employment rate increased by 2.5 percentage points to 60.7 percent, the largest increase among OECD members, followed by Slovakia with 1.3 percentage points. Even Japan recorded a 0.7 percentage-point jump in its employment rate even though the world's second largest economy grew at a much slower pace than Korea.
Economists say the Korean economy should be able to generate up to 69,000 new jobs if the GDP increases 1 percent, meaning it should have created up to 345,000 jobs last year with a 5-percent growth. But the nation produced only 282,000 new positions in 2007.
``The economy is growing without creating as many jobs as it used to, meaning that benefits of economic expansion do not spread to households from big businesses. The nation's industrial structure has transformed into a technology-and capital-dependent one from a labor-intensive one,'' a finance ministry official said.
He said manual jobs have largely been moved to China and other Asian economies in which labor costs are much cheaper than here, adding Korea's rigid labor market was another culprit behind falling job numbers as companies have become more reluctant to hire new workers.
In July, the number of new jobs reached 153,000, staying below the government's target of 200,000 for the fifth consecutive month, as businesses continued their reluctance to hire amid an increasingly pessimistic economic outlook. Earlier, the government cut its job growth target for the rest of the year to 200,000 from 350,000, citing sluggish domestic demand and lagging corporate investment.