KCCI "If COVID-19 Impact Continues Until Next Year, Unemployed Will Increase by 270,000"

[Asia Economy Reporter Su-yeon Woo] If the novel coronavirus infection (COVID-19) crisis continues until the end of next year, it is projected that up to 270,000 unemployed people could emerge.

The Korea Employers Federation (hereafter KEF) announced this on the 25th through a report titled "Policy Directions to Overcome the COVID-19 Crisis," commissioned from the Hyundai Research Institute (hereafter HRI). KEF and HRI created three scenarios based on the spread of COVID-19 and the timing of economic activity resumption to estimate unemployment and potential growth rates.

The report's scenario analysis results indicate that in the worst case, if the impact of COVID-19 persists on our economy until the end of next year, an additional 268,000 unemployed people will increase, and the unemployment rate will rise by 0.95 percentage points. Furthermore, the potential growth rate is estimated to decline by an additional 0.1 to 0.2 percentage points compared to the existing downward trend during the period from 2021 to 2035.

KEF stated, "Even before COVID-19, low growth and low inflation persisted for a long time, and due to weakened labor input, absence of new growth industries, insufficient regulatory improvements, and inadequate innovation environment, our economy's potential growth rate has declined. Under these circumstances, the COVID-19 shock is expected to further reduce the potential growth rate."

If the scenario is accelerated and the COVID-19 situation stabilizes at least by the end of this year, an increase of 135,000 unemployed people and a rise of 0.48 percentage points in the unemployment rate are expected. Even if the crisis ends by the end of June this year and most economic activities resume from the third quarter, unemployment is expected to increase by 96,000 people, and the unemployment rate to rise by 0.34 percentage points.

KEF added, "Considering the fundamental strength of our economy, corporate competitiveness, and business environment, it will not be easy for the private sector to recover good jobs after COVID-19."

KEF emphasized that to overcome the economic crisis facing the Korean economy, it is necessary to enhance growth vitality centered on the private sector, establish a productive distribution system, and expand a sustainable fiscal base. First, it is necessary to expand liquidity supply such as guarantees and loans to domestic companies and to alleviate tax burdens to support stable corporate management.

Additionally, KEF proposed measures to increase work motivation by linking welfare with work incentives, such as the Earned Income Tax Credit. They stressed the need to maintain government fiscal spending plans considering the private sector's innovation capabilities and to form a virtuous cycle of tax increase by establishing an incentive system that encourages corporate investment and job expansion.

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