Capital Region Manufacturing Jobs 'Negative Growth'... Signs of Prolonged Slump (Comprehensive)

2019 Net Growth Rate -0.2%
First Negative in 10 Years
Non-Capital Regions Face More Severe Employment Deterioration
Three Consecutive Years of Negative Growth from 2016 to 2018

[Asia Economy Reporter Jeong Dong-hoon] Domestic jobs have shown a slowdown over the past decade, indicating signs of a prolonged stagnation. In particular, jobs in the manufacturing sector in the Seoul metropolitan area experienced negative growth for the first time in the last ten years.

The Korea Chamber of Commerce and Industry's Sustainable Growth Initiative (SGI) pointed out on the 10th in its report titled "Current Status of Regional Jobs and Future Policy Tasks" that the dynamism of job creation is shrinking. SGI stated, "Employment sluggishness has persisted over the past decade," adding, "Since 2016, both the metropolitan and non-metropolitan areas have seen a decline in job creation rates, resulting in a decrease in the 'net increase rate,' which is the difference between job creation and disappearance rates."

This report is based on an analysis of job creation and disappearance rates using microdata from the National Business Survey from 2010 to 2019. The job creation rate refers to the proportion of new jobs created through business expansion or startups, while the disappearance rate refers to the proportion of existing jobs lost due to business contraction or closures.

Seoul Metropolitan Area’s Net Job Increase Rate Turns Negative in 2019

What is most concerning is the decline in manufacturing jobs. Especially in the metropolitan area, the decline in job creation has recently widened, turning the net increase rate negative in 2019. In non-metropolitan areas, the rate was negative for three consecutive years from 2016 to 2018. This implies that the deterioration of the manufacturing employment market is more severe in non-metropolitan areas than in the metropolitan area.

Jobs in manufacturing and related industries serve as a backbone for our economy. For every 1 percentage point growth in manufacturing firms, employment increases by 3.3 percentage points, demonstrating a high employment creation effect. During external shocks such as economic downturns, manufacturing also plays a role in mitigating impacts by securing employment stability compared to other industries. Permanent workers with employment contracts longer than one year account for 95.7% of the entire manufacturing workforce. The disappearance of manufacturing jobs could shake the foundation of our economy.

SGI recommended expanding foreign direct investment (FDI) attraction and strengthening reshoring policies (return of manufacturing to the home country), deregulating high value-added service industries, expanding startup support infrastructure, and supporting the cultivation of new growth engines in super-regional areas to improve the employment market through quality job creation and balanced regional development.

Strengthening Incentives for Domestic Return of Overseas Companies

In particular, SGI urged expanding foreign direct investment attraction and strengthening incentives for technology companies to return domestically. The report stated, "In response to the recent reorganization of the global value chain (GVC), foreign direct investment attraction should be expanded, focusing on advanced industries with high global investment demand such as semiconductors, displays, and materials, parts, and equipment (SoBuJang)."

It was also pointed out that tailored reshoring policy support considering the characteristics of specialized industries linked to regional key industries should be strengthened. Support such as tax benefits, subsidies, and workforce assistance is determined by the size and location of companies, and the aim is to increase incentives for high-tech companies to return through segmented policy support that considers the characteristics of regional key industries and advanced industries.

Woo Tae-hee, Executive Vice Chairman of the Korea Chamber of Commerce and Industry, emphasized, "We must expand quality jobs by creating added value through convergence between manufacturing and service industries and by advancing regional industries. In the metropolitan area, it is important to enhance the effectiveness of job creation through customized support policies that consider corporate growth paths and industry characteristics, while in non-metropolitan areas, revitalizing startups linked to regional key industries is crucial to boosting regional economic dynamism."

SGI also explained the need for bold deregulation in high value-added service industries such as digital healthcare and knowledge-based services. While calling for revitalizing the regional economy through quality job creation and startup support infrastructure, it argued that "innovative systems such as regulatory free zones and regulatory sandboxes, which ease bundled regulations related to new businesses faced by regions and local companies, should be actively utilized."

Additionally, SGI highlighted the Localize Gunsan project, a social venture development initiative that has injected new vitality into the Gunsan region’s economy, which had been stagnant for years due to manufacturing decline. It added, "Support for high value-added service startups and fostering them into regional innovative companies should be increased to attract young talent."

SGI also proposed building growth hubs by region and fostering new growth engine industries through the expansion of super-regional cooperation projects. The idea is to discover future strategic industries and promote regional innovation growth and job creation through super-regional cooperation that transcends existing administrative boundaries, led by local governments. The report pointed out that continuous cooperation between the government and local governments and the development of successful models considering the industrial structure characteristics of each region are important for revitalizing super-regional cooperation projects.

Woo Tae-hee, Executive Vice Chairman of the Korea Chamber of Commerce and Industry, stated, "We must expand quality jobs by creating added value through convergence between manufacturing and service industries and by advancing regional industries. In the metropolitan area, it is important to enhance the effectiveness of job creation through customized support policies that consider corporate growth paths and industry characteristics, while in non-metropolitan areas, revitalizing startups linked to regional key industries is crucial to boosting regional economic dynamism."

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