SEOUL – The ongoing new outbreak of the coronavirus has dealt a severe blow to the labor market in South Korea, reducing the number of people in paid employment by nearly 1 million in January alone.
The current unemployment crisis is the worst since the 1997 financial crisis in South Korea, President Moon Jae-in said Monday, pledging that his government would take all possible measures to face it. But government-led job creation efforts have their limits.
Koo Seo Jin, 25, who studied aviation at university, is about to abandon her dream of becoming a flight attendant. COVID-19 exploded after she graduated last spring, shortening her plans to take the necessary exams and rendering her career preparations useless.
She continues to hope that the exams will resume. But the virus has run wild, further obscuring airlines’ business prospects. Koo got a part-time job as a receptionist at a financial institution early this year, but she’s not ready to give up on her dream completely. “I will try again if the coronavirus problem subsides,” she said.
The COVID-19 pandemic has also derailed the plans of 23-year-old Kim Seung A, who graduated from university in dance and hoped to become a dance and Pilates instructor. But when classes ended during the health crisis, she failed to find a job in her chosen field. Now she works part-time in a restaurant, trying to save money so she can get a license as a Pilates instructor.
Disappointed as they are, Koo and Kim may be among the lucky ones: at least they have a job. In South Korea, the job crisis started even before the coronavirus outbreak due to a sharp rise in the minimum wage and stricter regulations on overtime. This prompted both companies and sole traders to cut back on recruitment.
The pandemic has fueled the trend. Many restaurants, along with leisure and sports facilities, have been forced to go out of business due to coronavirus restrictions. With the demand for part-time workers declining, many people are struggling to find work.
A January employment trends report released by the National Statistics Office on Feb. 10 reflects the dire state of the labor market. In January, the number of people in work fell by 980,000 to 25.82 million, the 11th consecutive year-on-year decline. The decrease was the largest since a decline of 1.28 million in December 1998, after the crisis of 1997. The 420,000 unemployed people in South Korea increased the unemployment rate to 5.7%, an increase of 1.6 percentage points year-on-year.
The misery of the labor market hits young people hardest. In January, workers in the 15 to 29 age bracket saw 310,000 jobs lost due to worsening conditions in industries hiring more young workers, such as restaurants and hospitality. Youth unemployment rose by 1.8 points to 9.5%.
The recruitment of older workers, who held out well, now also looks shaky: the number of workers aged 60 and over decreased by 15,000, from a gain of 250,000 in December.
Since the Moon government took office in 2017, the number of people over 60 in employment has increased, while employment among younger workers is declining. The trend is mainly due to demographic changes brought about by a declining birth rate, but there are other reasons.
An analysis of the fall in senior employment in January reveals a peculiarity of the government’s jobs policy, on which the government has spent 100 trillion won ($ 90.47 billion) over the past four years.
Many older people have part-time jobs as cleaners, cooks or traffic directors, with public institutions paying their wages. The number of working older people fell in January as such “employment tax programs” expired at the end of 2020. In addition, cold weather and heavy snowfall left many jobs for the elderly on hold.
“The employment situation is deteriorating for youth and young adults. As the polarization of employment leads [inequality] of income, the government should be strictly aware of the employment situation and take immediate emergency measures, ” Moon said Tuesday, giving his cabinet ministers strongly worded instructions.
Among other guidelines, he said, “We will first strengthen the public sector’s pump-suction role to significantly increase employment. We will implement a plan to directly employ more than 900,000 people in the first quarter.”
But half of those jobs should be reserved for older people as part of employment tax programs. In a damning editorial, Chosen Ilbo, a conservative daily, said the president’s “exceptional policy” is nothing more than providing taxpayer-funded part-time jobs. Job creation by mentioning the distribution of subsidies will boast of an increase in employment using false numbers, he said.
Since poverty among the elderly is a serious social problem in South Korea, it is not necessarily wrong to use tax money to create jobs for them. But priority must be given to providing “quality employment” to young people and women.
The government said public agencies such as Korea Electric Power, Korea Land and Housing and the National Health Insurance Service will increase the workforce by more than 45% in the current fiscal year from the previous year. But rising public payrolls are likely to stunt the efficiency of the government.
The private sector holds the key. The government wants to encourage the private sector to hire more people by expanding the regulatory “sandbox”, which exempts companies from certain rules. It is designed to promote innovation and mobility, provides support to venture firms and grants tax breaks to companies that maintain or increase employment.
But the government’s package of measures makes no mention of the deregulation that business is seeking.
There are limits to what the public sector can do on its own to strengthen South Korea’s labor market. To create sustainable jobs, the Korea Economic Research Institute, the think tank of the Federation of Korean Industries, calls for extensive measures to revitalize the private economy, such as deregulation and improving business conditions.
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