Economy adds fewest jobs since 2010
According to Statistics Korea on Friday, the total number of employed stood at 27.06 million in May, up by 72,000 from a year ago. This is the lowest increase in eight years and four months. It’s also the first time in a year and nine months that the number of jobs added fell below 100,000.
May is now the fourth month in a row that the number of new jobs added hovered around 100,000 and below 200,000, an indication that this is not a temporary phenomenon.
Before this year, the last time the figure remained below 200,000 for four consecutive months was during and immediately after the global financial crisis.
The country’s unemployment rate in May was also alarming. The data showed that the overall unemployment rate for May rose by 0.4 percentage points from a year ago to 4.0 percent, the worst rate in 18 years.
The jobless rate for young Koreans in May was 10.5 percent, up 1.3 percentage point from a year ago, the highest rate for the month since the government began tracking this specific data in 1999.
Statistics Korea explained that the youth unemployment rate went up because of the sudden increase in the country’s economically active population. It was pushed up due to the civil servant examination being moved forward from June to May this year.
“The employment trend from May is a shocking result,” said Kim Dong-yeon, the minister for strategy and finance and deputy prime minister for the economy, on Friday during an emergency meeting at the Seoul government complex held after the statistics agency released the data earlier in the day. “Despite all the effort to create jobs, the situation is showing no significant improvement. The country’s economic team, including myself, feels heavily responsible.”
Jobs in manufacturing shrunk by 79,000 compared to a year ago, a fall of 1.7 percent. The sector was affected by continuous restructuring in the automobile and shipbuilding industries.
Certain service industries considered vulnerable to increases in the minimum wage showed a decline in hiring. Employment in what Statistics Korea counts as the wholesale and retail trade, accommodation and food sector fell by 101,000, down 1.7 percent from a year ago, for its 12th straight monthly decline.
The employment crisis became apparent immediately following the over 16 percent increase in the minimum wage in January.
“It looks like the minimum wage [increase] played a role here,” said Sung Tae-yoon, a professor of economics at Yonsei University in western Seoul. “Industries such as food and lodging, which are sensitive to changes, took a tremendous hit.”
“What we see here is the combination of [the effect of the minimum wage increase] and worsening conditions in the manufacturing sector,” he added. “[The government] needs to see the reality of [what will happen if they put] a greater burden on local companies by increasing labor costs.”
The figure from May comes despite a recent statement by President Moon that the minimum wage increase has had a positive effect on 90 percent of the public. Recent data, though, show a worsening income gap between top and bottom tier workers.
The Korea Development Institute (KDI), a leading state-run think tank, and Kim, the Moon government’s top economic policymaker, warned against the fast-paced hikes to the minimum wage, saying the government should reconsider the pace it is increasing it.
Kim said in the meeting that the government will use the supplementary budget approved last month in order to remedy the employment situation.
The Finance Ministry submitted an extra budget bill in April worth about 3.9 trillion won ($3.5 billion), with 2.9 trillion of it earmarked to address the youth employment crisis. The National Assembly passed the bill on May 21.
“The supplementary budget will have a positive effect to a certain degree,” said Sung of Yonsei University. “However, what’s happening right now is that the labor market is becoming more inflexible, which makes it that much more difficult for companies to make the decision [to increase their hiring].”
BY CHOI HYUNG-JO [email@example.com]