"COVID Shock Focuses on Uninsured Employment Insurance Groups... Need to Prepare for Manufacturing Sector Deterioration"

Korea Institute for Industrial Economics and Trade 'Industry Employment Changes and Implications Due to COVID-19'
"Companies Adjust New Hiring... Concerns Over Youth Employment Shock"
"Need to Enhance Flexicurity... Improvement of Education and Training Systems Required"

On the 13th, citizens are waiting to receive consultations for unemployment benefits applications and employment support at the Seoul Employment Welfare Plus Center in Jung-gu, Seoul. Photo by Moon Honam munonam@

[Asia Economy Reporter Kim Bo-kyung] The employment shock caused by the novel coronavirus infection (COVID-19) was concentrated among those not enrolled in employment insurance, and there are calls to prepare for employment shocks in the manufacturing sector in the future.

The Korea Institute for Industrial Economics and Trade (KIET) stated this in a report titled "Industry-specific Employment Changes and Implications Due to COVID-19" on the 24th.

According to the report, the total number of employed persons in March decreased by 229,000 compared to the previous month, of which 82% (187,000) were not enrolled in employment insurance. This indicates that the employment shock caused by COVID-19 was concentrated among workers without employment insurance, such as daily and temporary workers.

For those enrolled in employment insurance, the issue was more about a decrease in new hires rather than layoffs. As of March, the number of employment insurance subscribers increased by only about 8,000 compared to the previous month, a sharp decline compared to 220,000 last year and 180,000 in 2018.

KIET analyzed, "The domestic labor market primarily responds to external shocks by adjusting new hires rather than layoffs," adding, "There is concern that this may cause employment shocks to young people newly entering the labor market."

The impact of COVID-19 was fully reflected in service sector employment starting in March. The service sector employment decreased by 418,000 in March compared to the previous month, then by 49,000 in April. KIET stated, "Whether COVID-19 spread is controlled simultaneously affects production and employment in the service sector," and diagnosed, "Since the service sector has a large face-to-face economy and is focused on domestic demand, controlling COVID-19 is key to employment recovery."

Comparing the employment scale by industry year-on-year before and after COVID-19 affected our economy (December to April), accommodation and food services decreased the most by 311,000. This was followed by educational services (-153,000), health and social welfare services (-101,000), arts, sports, and leisure-related services (-78,000), and wholesale and retail trade (-28,000).

KIET recommended preparing for a deterioration in manufacturing employment in the future. Manufacturing employment decreased by 22,000 in March compared to the previous month and by 46,000 in April, showing an expanding decline. Manufacturing has not shown as large an employment shock as the service sector due to factors such as a high proportion of regular workers, adjustments in operating days and working hours, responses like paid and unpaid leave, and significant employment adjustments already made last year.

However, given the current significant production shock, if the exhaustion of existing order volumes and the decrease in new orders due to COVID-19 continue, the impact on employment is expected to become more pronounced.

KIET stated, "Although the manufacturing employment shock is still relatively small compared to the service sector, it is becoming visible," adding, "Since exports account for a high proportion, the future is more concerning depending on overseas market conditions."

It further advised, "It is necessary to review ways to improve our society's flexicurity to protect jobs for vulnerable groups in the labor market and enhance job creation capabilities," and "It is also necessary to review and improve whether the existing education and training system can effectively respond to rapidly changing external environments."

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