Korean Economy’s Employment Capacity Hit a Record Lowest in Five Years

The Korean economy’s employment capacity hit a record lowest last year over the past five years. In particular, the manufacturing sector has grown without creating jobs for the past three years, causing concern for youth unemployment.

Last year’s employment capacity of the entire industry was -0.05, the record low since 1998, the Bank of Korea (BOK) announced Wednesday. The number means that the Gross Domestic Production (GDP) increased one percent when the employment fell 0.05 percent.

The job creation capacity of the entire industry hit bottom in 1998 when GDP and employment fell -6.9 percent and -9.5 percent respectively. It gradually rebounded to 0.21 in 1999, 0.53 in 2000, and 0.50 in 2001 before slowing down to 0.41 in 2002 and turning negative again in 2003 due to the fall in the number of employed.

In terms of the manufacturing sector, the employment capacity was 0.13 in 1999 and 0.39 in 2000. But, it registered negative for three consecutive years: -0.29 in 2001, -0.08 in 2002, and -0.18 in 2003.

The employment capacity of the service industry, which usually creates more jobs, fell to 0.11 last year from 0.52 in 2002. The industry’s job creation capacity surged from 0.57 in 1999, 0.72 in 2000, and to 0.87 in 2001 before taking a turn south in 2002.

“The IT industry, which creates fewer jobs such as semiconductor, led the economic growth last year while industries that create more jobs, such as distribution, contracted,” said BOK director An Yong-seong. “If the service industry cannot create jobs due to the sluggish domestic economy, Korea will see growth without jobs.”

Joong-Hyun Park sanjuck@donga.com