BOK governor calls for changes to labor market

Korea’s central bank chief said Sunday that the country should step up its efforts to promote the services industry and reduce gaps between regular and contract workers in order to create more jobs.

Bank of Korea Gov. Lee Ju-yeol said Asia’s fourth-largest economy, which relies on high-tech manufacturing, is no longer effectively creating jobs and domestic demand.

“Along with efforts to create quality jobs, we need to continuously push for measures to ease the polarized structure of the labor market, including the improvement of conditions of non-regular workers,” said Lee, who was recently nominated for a second term as BOK governor, in a report to the National Assembly ahead of his confirmation hearing.

He said the current semiconductor-driven growth has failed to create enough jobs and boost consumption. The nation’s manufacturing sector is “reaching maturity” and its competitiveness has been weakening as challenges from Chinese firms grow, he added.

“We need to bolster [economic growth’s] ripple effect on consumption by developing new growth industries and the services industry,” Lee said.

The BOK raised its key rate to 1.5 percent last November, its first rate hike in more than six years. This year Lee has hinted that additional hikes may be gradual.

In the short term, the BOK is facing challenges as the U.S. Federal Reserve and other central banks are likely to increase their key rates at a faster pace than was anticipated.

If the Fed raises its key rate this month, the interest rate gap between South Korea and the United States will be reversed.

Analysts said that expectations of a more hawkish U.S. monetary policy may put the Bank of Korea in a tight spot, because a higher key rate in the United States compared with Korea could become a destabilizing factor for the Korean economy, which is burdened with high and rising household debt.

YONHAP