Manufacturing Job Decline Worries... "Need Policies to Strengthen FDI and Reshoring"

[Asia Economy Reporter Jeong Dong-hoon] A recent study revealed that domestic jobs have shown signs of long-term stagnation as they have slowed down over the past decade.

According to the Korea Chamber of Commerce and Industry (KCCI) on the 12th, the KCCI's Sustainable Growth Initiative (SGI) pointed out in its recent 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 10 years," adding, "Since 2016, both the metropolitan area and non-metropolitan areas have seen a decline in job creation rates, leading to a decrease in the 'net increase rate,' which is the difference between job creation and job 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 downsizing or closures.

Metropolitan Area's Net Job Increase Rate Turned Negative in 2019

What is most concerning is the decline in manufacturing jobs. In particular, the metropolitan area has seen an expanding decline in job creation, with the net increase rate turning negative in 2019. In non-metropolitan areas, the rate was negative for three consecutive years from 2016 to 2018. This suggests 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 companies, employment increases by 3.3 percentage points, indicating a high employment creation effect. Even during external shocks such as economic downturns, manufacturing provides greater employment stability compared to other industries, helping to mitigate shocks. Permanent employees with 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 development of new growth industries in super-regional areas to improve the employment market through quality job creation and promote balanced regional development.

The photo shows the export loading dock at Hyundai Motor Company's Ulsan plant. It is not directly related to the article. [Image source=Yonhap News]

Strengthening Incentives for Domestic Return of Overseas Companies Needed

In particular, it called for 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."

It was also pointed out that customized reshoring policy support considering the characteristics of specialized industries linked to regional key industries should be strengthened. Support such as tax benefits, subsidies, and manpower assistance is determined by the size and location of companies, and the goal is to increase the incentive 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 KCCI, emphasized, "We must expand quality jobs by creating added value through the convergence of 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 increase regional economic dynamism."

Woo Tae-hee, Executive Vice Chairman of KCCI, said, "We must expand quality jobs by creating added value through the convergence of 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 increase regional economic dynamism."

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