South Korea jobless rate jumps to nine-year peak as minimum salary hike roils labor market

SEJONG — South Korea’s unemployment rate jumped to a nine-year high in January as more people shunned low-paying work in the face of rising minimum wages, putting further pressure on the economy and deepening policy frustrations for President Moon Jaein.

The unemployment rate rose to 4.4% in January in seasonally adjusted terms, the highest since the 4.7% level posted in January 2010, with most of the job losses seen in manufacturing and construction sectors, data from Statistics Korea showed on Wednesday.

Vanishing jobs is hitting Asia’s fourth-largest economy at a time when the trade dispute between the US and China — its two biggest trading partners — threatens to hurt the world’s sixth-largest exporter.

Exports declined in January as sales to China shrank for a third month in a row, adding to the strains for South Korea’s manufacturing and services sector jobs.

“The trade disputes hasn’t hit the nation’s manufacturers yet and recent job losses are more related to local restructuring issues and the minimum wage hikes hitting self-employed businesses,” said Lee Sang-jae, an analyst at Eugene Investment & Securities.

“Having said that, manufacturers are likely to hire even fewer workers should this exports downturn continue.”

In December, the jobless rate was 3.8%.

A combined 29% hike in the nation’s mandatory minimum wages over only two years have led to a drop in low-paying jobs across retailers, construction and retail sectors in a blow to the economy already grappling with slowing exports.

Effective from January, the minimum wage increased 10.9% from last year to 8,350 won ($7.46) an hour, following a 16 percent increase made for 2018.

Workers at the manufacturing sector were the hardest hit in January, shedding 170,000 jobs from a year earlier. Construction sector and retailers also lost 19,000 jobs and 67,000 jobs, respectively. —