Korea losing economic vitality

Lack of decent jobs for youth threatens nation's sustainability

By Park Jae-hyuk

Korea has been losing its economic vitality as the Moon Jae-in administration's efforts to boost employment have led to more part-time jobs for retirees and fewer full-time positions for young jobseekers, according to economists here and overseas, last Friday.

Criticizing the government for its short-sighted labor policies, the economists urged the administration to devise long-term strategies for the country's sustainable growth.

“The government's labor policy is more like a measure to help senior citizens maintain their incomes,” said Lee Phil-sang, an economics professor at Seoul National University. “The economy lacks the ability to create jobs. It has lost the ability since the nation's key industries have lost their global competitiveness.”

According to Statistics Korea, the number of employees in their 30s and 40s in June 2019 dropped by 32,000 and 182,000 respectively from a year earlier. The number of workers aged between 15 and 29 also decreased, by 4,000.

In addition, 66,000 people lost manufacturing jobs ― the number of workers in the sector has fallen for 15 straight months.

In the meantime, the number of employees in their 50s and 60s rose by 127,000 and 372,000 respectively from a year earlier.

Thanks to the hike in the number of jobs for senior citizens, Korea added more than 281,000 “employees” to the statistics for June, the largest year-on-year jump in 17 months since January 2018. The employment-to-population ratio marked 67.2 percent, also the highest June figure in 30 years.

The government appears to be satisfied with these indices.

“Considering that the employment-to-population ratio has increased for two consecutive months, it is obvious the job market is recovering,” a Ministry of Economy and Finance official said.

Rhee Mok-hee, vice chairman of the Presidential Committee on Job Creation, also displayed confidence, saying the statistics indicate improvement in the nation's employment situation.

Experts, however, expressed concern over the government's optimism.

“The higher employment-to-population ratio, which has been led by the government's fiscal policy to create jobs for senior citizens, will cause more difficulties in the economy,” Professor Lee said. “If the government sticks to the policy, it will have trouble in collecting enough taxes and will face financial difficulties.”

Sung Tae-yoon, an economics professor at Yonsei University, also worried about the nation's economic vitality. “Unlike the statistics, jobseekers do not feel any improvement in the nation's employment situation,” he said.

Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis, said: “I would argue that creating jobs that are not needed is not a good idea, at least in economic terms.”

As they said, the quality of jobs in Korea has deteriorated.

Data from Statistics Korea showed eight out of 10 workers aged between 15 and 29 were paid less than 2 million won ($1,700) in May.

The young workers left their first workplace within 17.3 months on average. Among them, 49.7 percent cited unsatisfactory working conditions as the reason for their resignations.

Bolstering private sector

In order to cope with these problems, the government should focus more on creating a favorable economic environment for businesses to operate, rather than intervening in the labor market, the economists said.

“I don't think the government should be too involved in setting labor policies. It is the private sector which creates jobs,” said Sohn Sung-won, an economics professor at Loyola Marymount University in the U.S.

“Right now the private sector is not hiring very many people because of uncertainties. It is the role of the government to reduce uncertainties so that the private sector can see ahead and invest. Businesses can tolerate bad news but not uncertainties.”

He urged the government to remove “stultifying” regulations, a view shared by Lee and Sung.

Mauro F. Guillen, director of the Lauder Institute at the University of Pennsylvania's Wharton School, also emphasized the role of the private sector.

“The government should sit down with large Korean companies and see what their needs for human capital are,” he said, “and then evaluate what kind of policies might be best to help younger people find a career path.”