Construction slump costs 511,000 jobs in five years

More than 500,000 people lost their jobs due to the construction industry slump over the past five years, according to the Construction & Economy Research Institute of Korea (Cerik).

The think tank over the weekend estimated 511,000 jobs disappeared from 2008-12.

“If those people had not lost their jobs, the nation’s average unemployment rate during the period … would have been 0.5 percentage point lower,” said Lee Hong-il, a Cerik researcher.

According to the institute, because of 2008 financial crisis and stalled housing market, investment in construction has decreased steadily, except for a government stimulus in 2009. Last year, 143 trillion won ($127 billion) was invested in construction industry, 15.5 trillion won less than in 2007. The accumulated value of decreased construction investments during 2008-12 was 37.2 trillion won, which cost the overall economy 78.2 trillion, according to the Cerik.

A primary culprit was the housing sector, where investment has decreased since 2006. Last year, only 27.6 trillion won was injected in the housing market, the lowest since 20.9 trillion won in 1989.

The construction industry’s contribution to gross domestic product growth was in negative territory for past three years, according to the Cerik. The institute said that in the 1990s, the construction represented 2 to 5 percentage points of GDP growth, but from 2010-12, it averaged minus 0.6 percentage point.

Meanwhile, the institute sees little improvement in the immediate future. As builders had 9.2 trillion won less in domestic orders in 2012, the Cerik estimated an additional 126,000 people will lose their jobs in the next five years at a cost of 19.4 trillion won in industrial output.

The Cerik said the government’s real estate plan announced April 1 should be enacted quickly, while more orders should come from the public sector.

By Joo Kyung-don [kjoo@joongang.co.kr]