South Korean econ­omy’s abil­ity to cre­ate jobs falls to low­est level

Iran Daily - - Tse & Global Economy -

The South Korean econ­omy’s abil­ity to cre­ate new jobs has fallen to the low­est lev­els in over eight years, of­fi­cial data showed on Sun­day.

Data by the Bank of Korea and Sta­tis­tics Korea re­vealed that the gross do­mes­tic prod­uct elas­tic­ity of em­ploy­ment for Asia’s fourth-largest econ­omy reached 0.132 in the sec­ond quar­ter of this year. This read­ing is the low­est tal­lied since 0.074 in the first three months of 2010 and comes as the elas­tic­ity num­bers stood at 0.356 in the fourth quar­ter of last year and fell to 0.252 in the first three months of 2018, Yon­hap wrote.

The GDP elas­tic­ity of em­ploy­ment, which showed how many jobs are cre­ated for in­dus­trial sec­tor growth, is cal­cu­lated by di­vid­ing on-year growth in job cre­ation with the real eco­nomic growth rate dur­ing a set pe­riod of time. Higher num­bers rep­re­sent more em­ploy­ment vis-avis in­dus­trial growth, while lower fig­ures are signs that fewer open­ings are avail­able de­spite gains.

The data showed South Korea elas­tic­ity on an an­nual ba­sis on a gen­er­ally down­ward trend fall­ing from 0.699 in 2014 to 0.395 in 2015 and 0.309 in 2016, although it rose to 0.400 last year.

For the first half, the read­ing hit 0.192, with the num­bers likely to reach the low­est in re­cent mem­ory.

The BOK and the sta­tis­tics of­fice said the rea­son for the weak­en­ing of em­ploy­ment is due in part to South Korea’s growth be­ing cen­tered on in­dus­tries that are highly au­to­mated and do not re­quire a lot of work­ers.

The coun­try’s growth in re­cent years has been in semi­con­duc­tors and petro­chem­i­cals that are fa­cil­ity or process in­ten­sive. They have con­trib­uted greatly to the GDP but are less help­ful in terms of em­ploy­ment. In con­trast, rel­a­tively la­bor in­ten­sive sec­tors like con­struc­tion, au­tos, ac­com­mo­da­tions and hos­pi­tal­ity have strug­gled with slug­gish or even neg­a­tive growth.

Re­lated to the cur­rent sit­u­a­tion, Kim Hyeon-wook, an an­a­lyst at the staterun Korea De­vel­op­ment In­sti­tute, said there is a need for the coun­try to move to­ward greater la­bor mar­ket flex­i­bil­ity with the state sup­port­ing ef­forts by firms to hire new peo­ple and by ex­pand­ing the coun­try’s so­cial se­cu­rity in­fra­struc­ture.

“There is a con­sid­er­able amount of la­bor rigid­ity, es­pe­cially in big com­pa­nies with strong unions,” he pointed out.

Oth­ers said that in or­der for South Korea to es­cape the con­di­tion of growth not be­ing ac­com­pa­nied by the cre­ation of jobs, the coun­try must move away from ex­ports and ac­tively build up the do­mes­tic econ­omy.

Joo Won, se­nior re­search fel­low at Hyundai Re­search In­sti­tute, claimed that with man­u­fac­tur­ing reach­ing its limit, Seoul needs to move to­ward the ser­vice sec­tor through re­forms cen­tered on the eas­ing of red tape.

“There is a need to pass re­formist leg­is­la­tion that can breathe new life into the ser­vice sec­tor,” the econ­o­mist said.

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