Korea’s ‘satisfactory’ economyFor those readers “living on the local economy,” reading the newspaper and other media reports of the Korean economy, we often scratch our heads and wonder if we are living in the same market. For example, Reuters recently carried a story of economic indicators and projections by the Bank of Korea. Sensing something was a bit off, I searched for other economic research.
I discovered information much less sanguine than the official Bank of Korea statistics that news agencies frequently quote. I found Gallup Korea’s recent report that seemed to counter some of the official economic indicators.
During the second half of each November, Gallup Korea polls some 1500 Koreans above the age of 19. The survey polls sentiments toward the coming calendar year. This past November’s results were largely similar to those of November 2011. Here are some of the highlights:
?How do you feel about the ROK economy in 2013?
Worse: 40% (previous year’s poll had a “worse” rating of 43%)
Better: 12% (no change)
Similar: 46% (previous year’s poll “similar” rating was 43%)
?How will your household fare in 2013?
?What will happen with unemployment in 2013?
Of interest is that the first two questions’ results, given the 2.1 percent margin of error, were statistically identical for the past two years. If there is any optimism about 2013, it would be because there is a 6-percent rise in expectations that unemployment will decrease versus a 3-percent drop in those expecting unemployment to increase. Still, given that half of the population believes unemployment will rise in 2013, I would caution government workers and politicians not to cheer too loudly.
Now, contrast the above with the aforementioned Reuters news release on the Bank of Korea’s sanguine report that customer sentiment was the strongest in 8 months at 102 versus December’s 99 score, with 100 representing neutral feelings.
The BOK also projected the coming 12 months’ inflation to be just 3.2 percent, which is entirely in line with fantasies that this government agency has been broadcasting for the past years. Obviously, whoever decides what goes into the economic basket of indicators has considerable influence on the results.
For most Koreans, more significant inflation can be seen in the substantial increases of food prices, utilities (electrical rates alone were hiked 4.9 percent last August and will go up another 4.0 percent this month). And many Koreans expect taxi rates to rise.
When it comes to unemployment, the most important figures are those assigned to young people. While the national unemployment average is officially recognized as being only 3.0 percent, only 60.1 percent of Koreans in their 20’s are recognized as participating in the economy. And, of course, to have a part-time job, including working at a convenience store with a college degree, means one is “employed.”
Even so, at the end of 2012, youth unemployment was 7.5 percent. Interestingly, no one seems to bother reconciling 39.1 percent of young people being economic non-participants with just 7.5 percent youth unemployment.
As this paper’s recent article, “Tougher times ahead for twenty-somethings,” pointed out, Korea’s largest 194 companies this past year offered 18,950 (down from 20,500 the previous year) career potential, entry-level jobs.
Considering that virtually all Koreans complete high school, and 80 percent graduate from college or university, it is not surprising that in 2012 a large portion of the 300,000 college graduates competed for those 18,950 jobs. Possibly due to many discouraged job seekers having returned to college to gain additional degrees, we may expect as many 500,000 graduates to enter the job market as soon as 2015.
Again, as this paper pointed out, many young Koreans have given up on marriage and children. It comes as no surprise that Korea has one of the lowest birth rates among OECD countries.
Finally, allow me to suggest why the consumer price index is as good as it may be. It could well be that many Koreans in their 20s and 30s are living at home, forsaking marriage without saving for their independent housing, but making the best out of a dire future by living for today by freely consuming in short-term pleasures as a way to somehow make up for their long-term disappointments.
Given all of this and much more, the “news” about small, single-digit improvements in government statistics about CPI, inflation and unemployment seem to be divorced from the greater reality that makes up most Koreans’ lives. The real story is much more complicated, but few international news agencies take the time to dig down and discover what is actually happening with the majority of Koreans.
The real story is much more fascinating, if at times grim, suggesting that Korea could be operating on a two-level economy - that of large companies and the wealthy as opposed to that of small- and medium-sized companies and the majority of Koreans.
Discussion of this phenomenon fills the Korean-language blogs and traditional media, but one rarely sees mention of this in the foreign language media. No wonder offshore observers of the Korean economy are so confused.
*The author is president of Soft Landing Korea, a business development firm, and an alliance partner of Odgers Berndtson Japan, a global Big Six executive recruitment consulting company.
by Tom Coyner