Revive service industries

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Revive service industries

Korea’s competitiveness in service industries is getting weaker. According to an international comparison of service industries by the Bank of Korea, the country’s service industry productivity is equivalent to 73 percent of that in the United States, 84 percent of Japan’s and 82 percent of an average of six European nations.
For similar hours of work, Korea’s service industry output is less than that of other developed countries. What is more shocking is that the gap in productivity in most service industries between Korea and other developed countries has widened since the Asian financial crisis in 1997 and 1998, except in information and telecom industries.
The size of the workforce in the uncompetitive local service industries, however, is growing. At the end of last year, 17.6 million people worked for service industries, which is equal to 75 percent of the total employed population of 24.4 million.
More people are flocking to service jobs, but the industries’ competitiveness is declining. As such, the quality of life of service industry workers cannot improve, and decent jobs cannot be created in the industries. The stagnation in the industries, which make up three quarters of the country’s employment, perpetrates economic disparity in Korea and will be a barrier to the country’s economic growth.
Manufacturing industries are already saturated and it is impossible to reallocate the workforce out of the service industries. In the end, service industries themselves need to find solutions.
First, regulations need to be loosened and competition encouraged to fight inefficiency in the industries. Restaurant and lodging businesses are already saturated and need restructuring. What is most important is to focus on improving high-value service industries.
The country needs to further improve the competitiveness of information technology, biotechnology and cultural service industries, where Korea is already strong. For education, law and financial sectors, where the country lags behind, it needs to improve competitiveness by the opening of markets. Reviving the service industries will revive the economy.
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