[Opinion] The Shadow of South Korea's 'Full Employment'

‘Full employment’ refers to a state in which everyone who has the ability and willingness to work is employed. A situation where unemployment occurs due to a shortage of jobs is called ‘underemployment.’ Theoretically, full employment means zero unemployment, but generally, it refers to a state where there is no involuntary unemployment except for frictional unemployment (unemployment caused by job transitions). In reality, an unemployment rate below 3-4% is often considered to represent full employment.

According to Statistics Korea, the unemployment rate for Koreans aged 15-64 (based on OECD comparison standards) last year was 2.7%. The unemployment rates were 3.8% in 2019, 4.0% in 2020, 3.6% in 2021, and 2.9% in 2022. This represents a 1.3 percentage point drop compared to 2020, when the COVID-19 pandemic began, and a 1.1 percentage point decrease compared to 2019, when there was no COVID-19 impact. This is the lowest figure since related statistics began being compiled in 1989. The employment rate was the highest at 69.2%. Inside and outside the government, there are evaluations that "these employment indicators are close to full employment."

The government’s estimated economic growth rate for last year is 1.4%. Excluding special circumstances such as the foreign exchange crisis, this is the lowest growth rate since industrialization. Exports decreased by as much as 7.4% compared to the previous year. The current account balance showed a surplus of $31 billion, but this was a recession-type surplus caused by a 12.1% decrease in imports. The Korean economy was not smooth last year. The government expects a growth rate of 2.2% this year, supported by a recovery in exports, but domestic demand stagnation remains a wild card.

Why did employment indicators set record highs despite the overall sluggish economy? The Ministry of Economy and Finance analyzed that this was due to a significant increase in employment in the service sector, accommodation, and healthcare after the endemic phase (periodic outbreaks of infectious diseases). Employment among seniors aged 60 and over and women is particularly notable. Conversely, employment in manufacturing, which offers many ‘good jobs,’ decreased. This is due to a decline in jobs in sectors such as chemicals and electronics caused by poor export performance. Employment among youth (aged 15-29) also dropped by nearly 100,000. It is not a situation to cheer as ‘full employment has been achieved.’ It is also unsatisfactory to simply nod along to the government’s evaluation of ‘the highest employment rate and the lowest unemployment rate ever recorded.’

The employment situation this year is likely to worsen compared to last year. There are repeated warnings that domestic demand will enter a recession phase this year. Due to high inflation and high interest rates, households’ real purchasing power has declined, and investment in construction and other sectors is expected to be weaker than last year. Although exports are recovering, it takes considerable time for export growth to translate into employment. Both domestic demand and exports are not optimistic for the labor market. Last year’s employment indicators may have been the peak.

Despite last year’s export decline, sluggish real estate market, and rising prices, could it be that Korea’s economy held up because there were at least some jobs? If both household consumption and corporate investment decrease, pushing the overall domestic economy into a recession phase, a cold wave could hit the labor market as well. If even opportunities to work diminish, economic and social crises and confusion will rapidly intensify.

The wisest way to create good jobs is to proactively ease regulations on businesses and continuously innovate social structures. Regardless of the pros and cons related to the general election, it is time for both ruling and opposition parties to pay more attention to regulatory improvements that businesses desperately desire.

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