Bank of Korea: "Post-COVID Job Vacancy-Job Seeker Gap Widens... Productivity Down, Unemployment Up"

Bank of Korea Survey and Statistics Monthly Report
'Assessment of Labor Market Mismatch Situation After COVID-19'

[Asia Economy Reporter Kim Eunbyeol] Due to the employment shock caused by the COVID-19 pandemic, the number of people seeking jobs has increased, while the number of employers hiring has decreased, resulting in a further deepening of labor market mismatch. If this labor market mismatch becomes entrenched, employment recovery is expected to be significantly delayed, and losses in labor productivity will likely expand further.

According to the "Monthly Survey Statistics" released by the Bank of Korea on the 1st, the gap between job openings and job seekers across industries has widened since COVID-19, and labor market efficiency has declined, causing the mismatch index to rise sharply. The mismatch index, which averaged around 6.4% in 2018-2019, increased to 7.3% in the second quarter of last year, 9.2% in the third quarter, and 11.1% in the fourth quarter.

The widening gap between job openings and job seekers is attributed to service industry workers who lost their jobs due to COVID-19 being unable to move in large numbers to industries with high labor demand, such as construction. The decline in matching efficiency that connects employers with job seekers, as well as difficulties for service workers to find jobs in other industries due to lack of training, are also contributing factors.

Hwang Subin, head of the Employment Analysis Team at the Bank of Korea’s Research Department, explained, "It is estimated that the rise in the unemployment rate last year was largely due to the expansion of labor market mismatch." She added, "The increase in mismatch after COVID-19 was mainly caused by the pandemic shock concentrating on vulnerable sectors and the worsening employment difficulties, which reduced labor market efficiency."

As the gap between job openings and job seekers across industries and occupations widens, the unemployment rate appears to have risen further. According to the survey, compared to the average level from 2015 to 2019, the contribution of mismatch unemployment to the actual unemployment rate last year was 33.8% (based on the annual monthly average). Losses in labor productivity (value added per employed person) due to inefficiencies in labor allocation across industries expanded to 1.9% in 2020.

Hwang said, "Considering that the mismatch index rose sharply during the global financial crisis and then remained at a high level, there is a possibility that this shock could become a structural problem." The deepening labor market mismatch can have negative effects such as rising unemployment, sluggish hiring, and declining labor productivity," she said.

She also advised, "If labor market mismatch becomes entrenched, employment recovery could be significantly delayed due to stigma effects, and losses in labor productivity caused by inefficient labor allocation could further increase. It is necessary to activate public and private employment support services to alleviate information asymmetry between companies and job seekers, and to strengthen vocational training centered on industries facing labor shortages to induce employment restructuring across industries and improve labor productivity."

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