When Online Consumption Increases by 1%P, Accommodation and Restaurant Employment Decreases by 27,000 People

KDI Report on the Impact of Online Consumption Expansion on Prices and Employment

As online consumption has expanded, it has lowered the inflation rate but exerted downward pressure on overall employment by reducing the number of employees in the accommodation and food service sectors.

On the 29th, the Korea Development Institute (KDI) published a report titled "The Impact of Online Consumption Expansion on Prices and Employment" (Researcher Ji-yeon Kim) containing these findings.

According to KDI, the share of online consumption increased from 14% in 2017 to 27% this year. The shift to online consumption lowered product prices by about 2.4% during the same period. Considering that products account for 44.8% of the consumer price index, the expansion of online consumption reduced the consumer price index by approximately 1.1% over the same period.

Negative effects were observed on employment. It was analyzed that a 1 percentage point increase in the share of online consumption reduces the increase in employment in the accommodation and food service sectors by up to 27,000 people two quarters later. This ripple effect lasted for about two years. In the wholesale and retail trade sector as well, the quarterly increase in employment shrank by up to 27,000 people after the online consumption shock occurred.

Positive effects appeared in transportation and warehousing employment, which includes workers in delivery and logistics. In the quarter when the online consumption shock occurred, the increase in employment expanded by 17,000 people, creating jobs in the short term. KDI suggested that since the overall economy experienced a greater employment contraction effect, the price stabilization effect from the expansion of online consumption should not be hindered by monopolization in related industries.

Researcher Kim said, "While there was a job creation effect in transportation and warehousing, including delivery and logistics jobs, it only slightly mitigated the decline in face-to-face service industries, indicating that workers’ movement between industries is not smooth. Since the expansion of online consumption is triggering employment adjustments within and between industries in the labor market, economic and social policies responding to this are necessary."

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