The Bank of Korea Says "Possibility of Prolonged COVID Employment Shock... Industry-Specific Support Needed"

Employment Shock as Companies Cut Jobs Amid COVID-19-Induced Economic Slump
May Last Longer Than Expected...Focused Support Needed for Hard-Hit Industries

[Asia Economy Reporter Kim Eunbyeol] Given the significant labor demand and supply shocks caused by the spread of the novel coronavirus infection (COVID-19), an analysis has emerged emphasizing the need to examine industries most affected by the shocks and provide selective, differentiated support.

On the 31st, the Bank of Korea stated in its 'BOK Issue Note - Measurement and Evaluation of Labor Market Demand and Supply Shocks from COVID-19' that "Between March and April, corporate hiring sharply declined, involuntary unemployment increased, and household labor market participation contracted," adding, "This labor market disruption is the result of a combination of labor demand shocks, where corporate employment decreases, and labor supply shocks, where household job-seeking activities shrink."

In particular, according to the Bank of Korea's analysis, the impact of labor demand shocks is greater and lasts longer than that of labor supply shocks. Park Changhyun, head of the Bank of Korea's survey team, explained, "In the case of 'demand shocks,' where companies refrain from hiring due to concerns about economic downturns, recovery takes longer because it only begins gradually after confirming economic improvement." On the other hand, although labor supply shocks?such as reduced job-seeking activities due to fears of COVID-19 infection?varied by industry, their scale and duration were smaller compared to demand shocks.

Looking at labor market shocks by industry due to COVID-19, industries with frequent face-to-face contact, such as accommodation and food services, arts, sports and leisure, and education, experienced significant shocks. Due to the spread of infectious diseases, dining out, outdoor activities, and offline classes sharply declined, causing major shocks on the labor demand side, and given the nature of these industries where services are provided through face-to-face contact, job-seeking activities decreased due to infection risks, resulting in substantial labor supply shocks as well. Conversely, industries where remote work is possible and non-face-to-face product and service supply accounts for a large share, such as ICT, professional, scientific and technical services, and finance and insurance, experienced relatively minor negative labor market shocks.

Park emphasized, "Since the economic impact of infectious diseases like COVID-19 varies by industry, selective and differentiated responses are necessary depending on the cause of the shock," adding, "It is important to focus on stabilizing industries heavily exposed to labor demand shocks, such as those with a high proportion of face-to-face work or occupations."

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