Complex Crisis, Employment to Take a Hit Next Year... Is an Investment and Employment Cold Wave Coming?

KCCI Highlights This Year's Labor Market Feature: 'Employment Growth Exceeds Economic Growth'
Employment Up 1.04% per 1% Economic Growth This Year

Next Year Hiring Scale to Shrink Due to Profitability Decline and Financial Market Tightening
High Likelihood of Workforce Restructuring... Concerns Over 'Employment Freeze'

Experts Call for Support Measures to Ease Corporate Tax Burden and More

On July 5th, 2022, job seekers were looking at the recruitment and consultation reservation board at the 2022 Mid-sized Companies Job Fair held at COEX in Gangnam-gu, Seoul. Photo is not directly related to the article. [Image source=Yonhap News]

This year, the job market, which had somewhat favorable conditions, is expected to freeze again next year due to a complex crisis situation. Although the employment elasticity, which indicates the number of employed people relative to economic growth, showed the highest figure in about 60 years, it is forecasted to fall below the long-term average next year. Concerns about companies reducing investment and employment amid the triple high situation of high interest rates, high exchange rates, and high inflation are becoming a reality.

According to the Korea Chamber of Commerce and Industry's SGI (Sustainable Growth Initiative) on the 5th, SGI recently predicted in its report "Current Status and Characteristics of the Labor Market" that "according to the Bank of Korea's (August) forecast, this year's economic growth rate will be 2.6%, and the employment growth rate will be 2.7%."

The report continued, "Based on the forecasts of economic growth rate and employment growth rate, the employment elasticity for this year is estimated to be 1.04 (meaning employment increased by 1.04% when GDP increased by 1%)," adding, "This figure is the highest since employment statistics began to be provided in 1963." Employment elasticity is the value obtained by dividing the employment growth rate by the economic growth rate; a higher employment elasticity means that the number of employed people has increased more relative to economic growth.

For next year, the employment growth rate is expected to remain at 0.5%, and employment elasticity is also expected to plunge to 0.24. This is a significant drop from this year's employment elasticity of 1.04 and falls short of the long-term average of 0.34.

Source: Korea Chamber of Commerce and Industry

Kim Cheon-gu, a research fellow at SGI of the Korea Chamber of Commerce and Industry, said, "This year, employment recovery exceeding growth was seen due to increases in youth and elderly employment, expansion of jobs related to digital transformation, and a decrease in foreign workers entering the country," adding, "Next year, companies facing difficulties such as deteriorating profitability and tightening financial markets are likely to reduce hiring and adjust workforce structures, making it harder for job seekers to find employment."

Researcher Kim further urged the need for ▲labor reform ▲training talent desired by companies ▲measures to maintain the productivity of the elderly, emphasizing, "In the short term, we must actively respond to the contraction of the labor market next year, but in the long term, efforts should continue to resolve structural problems in the domestic labor market and create jobs in sectors where companies' labor demand is increasing."

Investment and employment contraction due to economic downturn seem inevitable. According to the regional economic outlook report released by the Bank of Korea in June, more than two out of ten companies are considering employment adjustments and reductions in new investments as countermeasures. Stagflation (low growth and high inflation) has already become a reality, and inflation and downward economic factors continue to accumulate.

Professor Sung Tae-yoon of Yonsei University's Department of Economics said, "The reduction in corporate investment is an inevitable decision as the market continues to deteriorate," adding, "Currently, companies are more focused on how to survive rather than increasing investment or new employment."

An industry official pointed out, "Increasing new hires at a time when corporate burdens are increasing is a significant burden," emphasizing, "It is urgent to create an environment where companies can conduct normal business activities, such as by reducing tax burdens."

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