Manufacturing job losses

About 72,000 manufacturing jobs in Korea migrated abroad last year, according to a report by the Korea Economic Research Institute. KERI made the analysis by calculating direct and indirect job-creation effects based on outward direct (ODI) and foreign direct investment (FDI) statistics. Between 2011 and 2020, Korean companies’ ODI reached an annual average of 12.4 trillion won ($11 billion), while inbound FDI by foreign businesses stood at 4.9 trillion won, resulting in a net investment outflow of 7.5 trillion won from Korea and a loss of 49,000 jobs annually.

The semiconductor sector saw the biggest net ODI at 2.5 trillion won, followed by the electronic equipment and automotive industries, which saw net outflows of 2.2 trillion won and 1.8 trillion won, respectively. Up to 20,000 jobs moved out of the country in the semiconductor and automotive sectors alone. “If Korea had managed to keep the 72,000 manufacturing jobs at home last year, the nation could have lowered its jobless rate by 0.3 percentage points from 4 percent to 3.7 percent,” KERI said.

When businesses invest, jobs are created. Underinvestment leads to fewer jobs, eventually hollowing out the nation’s industrial base, therefore, expanding corporate investment is the shortcut to escaping from the current employment crisis. However, more and more Korean companies are moving abroad while foreign firms are reluctant to invest in Korea. The biggest reason for the latter is various regulations. The KERI report pointed out that the rigid labor market has dragged down new investment and employment. The manufacturing industry grows in a business-friendly environment, but the situation here is going in the opposite direction.