Record High Employment Rate in Q2? ... 8 out of 10 Experts Express Concern Over "Job Growth Without Economic Growth"

Federation of Korean Industries and Korean Labor Economics Association, 'Expert Survey on Employment Without Growth'
Concerns Over Deterioration of Employment Quality and Deepening Dual Labor Market Structure
Support Needed for New Industry Sectors

[Provided by the Federation of Korean Industries]

[Asia Economy Reporter Han Yeju] Despite the domestic economy contracting amid expanding internal and external uncertainties such as high inflation, high interest rates, and high exchange rates, the employment rate for those aged 15 to 64 reached an all-time high of 68.9% in the second quarter of this year. Concerns have been raised that if this phenomenon of 'employment without growth' continues, it could lead to negative side effects such as deterioration in employment quality and deepening polarization in the labor market.

On the 12th, the Federation of Korean Industries (FKI) conducted a 'Survey on Expert Perceptions Regarding Employment without Growth' targeting economic experts affiliated with the Korean Labor Economics Association. The results showed that 8 out of 10 experts (81.6%) responded that 'employment without growth' is a phenomenon that should be a cause for concern.

Among the experts, 6 out of 10 (63.1%) predicted that the current situation, where the employment rate remains high despite the economic contraction, would persist for 'more than six months.' This was followed by 'between three and six months' (23.7%), 'a temporary phenomenon within three months' (7.9%), and 'unpredictable' (5.3%).

Experts cited the main causes of the 'employment without growth' phenomenon as ▲'the emergence of new jobs such as non-face-to-face and platform jobs' (28.6%) and ▲'an increase in public, elderly, and short-term jobs due to fiscal input' (28.6%). Other reasons included ▲'the recent economic downturn not yet reflected due to the lagging nature of employment' (18.6%), ▲'a decrease in foreign workers entering the country due to the COVID-19 pandemic' (10.0%), and ▲'a decline in the working-age population and job mismatches' (8.6%).

The FKI explained, "Despite the contraction of the hiring market amid economic growth slowdown and industrial structural changes, the employment situation is favorable due to a surge in platform and digital jobs driven by increased non-face-to-face demand caused by the spread of COVID-19." They added, "The expansion of fiscal-supported elderly jobs to address the increase in the elderly population and elderly poverty also contributed to the rise in the employment rate."

Among the experts, 7 out of 10 (73.0%) expressed concern that the continuation of employment without growth would lead to 'a deterioration in employment quality, such as an increase in public, elderly, and short-term jobs.' Additionally, 75.7% responded that employment without growth would exacerbate the dual structure of the labor market, which is concentrated on regular workers and labor unions.

The FKI analyzed, "The continuous creation of jobs without economic growth support means an expansion of low-wage and low-skilled jobs. If this phenomenon persists, it is highly likely that polarization between good jobs, such as those in large corporations and regular positions, and poor jobs, such as those in small and medium-sized enterprises and irregular positions, will intensify."

Seven out of 10 experts (70.3%) anticipated that 'labor shortages will worsen amid the decline in the working-age population and changes in industrial structure.' In fact, the number of unfilled positions that companies could not hire for increased by 70.6% from 102,000 in 2021 to 174,000 in the first half of 2022. Furthermore, 43.3% of respondents expected 'a decline in corporate competitiveness due to decreased labor productivity.'

The FKI expressed concern, stating, "Despite the favorable employment situation, labor shortages are intensifying in certain industries such as the manufacturing industry, shipbuilding, and information and communication sectors. If this unbalanced supply and demand of labor continues, it could trigger a vicious cycle that fuels low growth."

Regarding the outlook for the hiring market in the second half of the year, 47.4% of experts responded that it would 'worsen compared to the first half,' accounting for nearly half. This figure is 9.1 times higher than the 5.2% who responded that it would 'improve compared to the first half.' Another 47.4% expected it to be 'similar to the first half.'

On tasks for improving economic vitality and creating quality jobs, experts pointed out that ▲'support for fostering growth engines in new industries' (29.6%) is most necessary. This was followed by ▲'inducing expanded corporate investment through deregulation in labor and industrial sectors' (28.2%) and ▲'improving productivity through flexible working hours and wage system reforms' (26.8%). Other suggestions included 'establishing effective policies such as reforming the education system to resolve job mismatches and supporting employment matching programs for small and medium-sized enterprises' and 'promoting cooperative labor-management relations.'

Choo Kwang-ho, head of the Economic Headquarters, emphasized, "Ultimately, the increase in jobs without being supported by growth not only causes side effects such as deterioration in employment quality and polarization in the labor market but also has limitations in sustainability. Therefore, it is necessary to improve employment conditions for companies through fostering new industries and regulatory reforms in labor and industrial sectors to create quality jobs."

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