Bank of Korea: "Long-term Unemployed Hit Hard by COVID-19"

[Asia Economy Reporter Jang Sehee] An analysis revealed that employment in high-risk automated jobs significantly decreased due to the impact of COVID-19, and long-term unemployment increased. Employment in businesses with fewer than 300 employees also showed sluggishness.

On the 21st, the report titled "Scars of COVID-19: Three Issues in the Labor Market," published in the Bank of Korea's BOK Issue Note (written by Song Sangyun, Manager of the Employment Analysis Team at the Bank of Korea Research Department, and Kim Haeun, Researcher of the Employment Analysis Team), stated this. The research team analyzed factors that could negatively affect South Korea's labor market in the mid to long term as the acceleration of automation, increased employment concentration, and prolonged unemployment.

According to the research team's analysis, workers engaged in high-risk automated jobs were directly hit by COVID-19. Jobs with an automation probability of 70% or higher were classified as high-risk automated jobs, while those with less than 70% were classified as low-risk automated jobs. Based on the entire industry, the number of employed persons in the low-risk automation group increased by 2.8% from April 2017 to October 2020, whereas the high-risk group decreased by 2.5% during the same period. In the face-to-face service industry, which was severely affected by COVID-19, the number of employed persons in the low-risk group decreased by only 2.4% during this period, but the high-risk group decreased by 10.8%.

After COVID-19, the number of employees in businesses with 300 or more employees showed an increasing trend, but employment in businesses with fewer than 300 employees showed sluggishness, indicating a widening employment gap between business sizes. In particular, employment in businesses with 30 to 299 employees has still not recovered to the pre-COVID level (February 2020) as of June this year, despite recent employment improvements.

Manager Song Sangyun explained, "The employment HHI is a representative indicator (ranging from 0 to 1) that shows employment concentration; the closer it is to 1, the more employment is concentrated in a few companies. An increase in employment concentration negatively affects the employment growth rate and may restrict employment recovery. When employment is concentrated in a few companies, due to economies of scale and other effects, it is difficult for new companies to enter the market, leading to a decline in job creation."

The impact of COVID-19 showed a tendency toward prolonged unemployment. When dividing unemployed persons into short-term unemployed (job search period of 3 months or less) and long-term unemployed (job search period of 4 months or more), short-term unemployed decreased by 15.5% in June this year compared to February 2020, but long-term unemployed increased by 26.4%. From January to June this year, the long-term unemployed increased by an average of 49,000 people per month compared to the same period last year. The long-term unemployed were counted as 270,000 at the end of 2019, 313,000 at the end of 2020, and 357,000 at the end of June this year.

Meanwhile, one of the side effects of prolonged unemployment is the increase in discouraged job seekers. Looking at the discouraged job seeker conversion rate (the proportion of unemployed persons who have experienced giving up job search within 3 months), the conversion rate for short-term unemployed was only 11.9%, whereas the rate for long-term unemployed reached 21.1%. The increase in discouraged job seekers leads to a decline in the economic activity participation rate, which can negatively affect employment recovery.

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