Government Floods Public Jobs Despite Low Employment Effectiveness Compared to Budget

Declining Trend in Employment Induction Coefficient... 13.8 in 2010 → 10.9 in 2017

"Need to Create Corporate Environment That Maintains Employment Rather Than Creating New Jobs"

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The government's measures to respond to the employment shock caused by the novel coronavirus infection (COVID-19) are expected to ultimately become direct job creation projects funded by taxes. However, there are concerns that the public sector job supply plan has limited employment effects relative to the budget and may even have side effects that erode the economy's fundamental strength. The government's planned 'Digital New Deal' is also criticized for having a low employment inducement coefficient, limiting its job creation potential.

On the 13th, the government held a meeting of related ministers (Green Room Meeting) chaired by Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki to review the employment market. It was decided that at the Emergency Economic Central Countermeasures Headquarters (Economic Central Headquarters) meetings scheduled for the 14th and 21st, a rapid supply plan for '550,000+a new public sector jobs' would be discussed.

The more than 550,000 jobs to be supplied this time are a kind of 'public part-time jobs' created by injecting government budget. It is expected to include tasks such as general, digital, IT, ICT, public data construction, multi-use facility quarantine, and administrative support.

The government will also discover 300,000 public work jobs targeting employment groups who are immediately struggling to maintain their livelihoods. The work period is up to six months, and wages are expected to be about 1.8 million won based on the 2020 minimum wage of 8,590 won. The government has reached a consensus that it must actively respond to employment difficulties, especially focusing on temporary/daily workers and self-employed persons who have been relatively severely affected. A government official said, "As the COVID-19 situation prolongs, employment indicators have hit bottom," adding, "We plan to first create public sector jobs by investing the budget and then create private sector jobs through the Korean New Deal project."

However, the market is concerned that government-led job policies have limited employment effects and may paradoxically undermine the private job market's employment creation capacity.

Professor Park Young-beom of Hansung University’s Department of Economics said, "Public sector jobs cannot be seen as a concept that creates jobs; it is more like distributing money to the elderly and youth," emphasizing, "Jobs that can strengthen the economy’s fundamental strength should be discovered in the private sector." He further analyzed, "The longer the COVID-19 end date is delayed, the more difficult life will become for daily workers, self-employed, and youth."

In the private sector, the problem is also that the actual employment effect relative to the budget is low. According to the 'Input-Output Table (Extended Table) compilation results' previously announced by the Bank of Korea, the employment inducement coefficient has been continuously declining. The average employment inducement coefficient for all industries fell from 13.8 in 2010 to 11.8 in 2015 and 10.9 in 2017.

The employment inducement coefficient refers to the number of jobs directly and indirectly induced across all products when the final demand for a specific product increases by one unit (1 billion won). In the case of ICT services related to the Digital New Deal that the government plans to promote, the employment inducement coefficient is 9.1, which is below the average (10.9). While the job budget is gradually increasing, jobs are decreasing, making criticism that it is like pouring water into a bottomless jar inevitable.

Professor Kim Tae-gi of Dankook University’s Department of Economics analyzed, "Besides simply creating many new jobs in the public sector, it is important to create a business environment that can maintain employment," adding, "Due to various regulations such as minimum wage and the 52-hour workweek, the burden on companies has increased, leading relatively low-wage jobs to move overseas."

This content was produced with the assistance of AI translation services.