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Gov't should innovate service industry to create more jobs

Gov't should innovate service industry to create more jobs

Posted January. 04, 2019 07:29,   

Updated January. 04, 2019 07:29


President Moon Jae-in on Thursday stressed innovative business start-ups for job creation during his visit to a makerspace, a collaborative workplace for people and businesses seeking to create new products. The remark follows his call for reinvigorating corporate investments and innovation-led economic growth at a New Year's meeting with local business leaders, vowing to push for building 30,000 "smart" factories for manufacturing innovation. However, it is odd that the Moon administration, which considers job creation one of its life-or-death tasks, has made no mention of innovating the service industry, which can create numerous jobs.

At a time when Korea's top-five key industries – semiconductors, petrochemicals, automobiles, steel, and shipbuilding – are facing a crisis stemming from challenges from China and other emerging economies and changes in the industrial paradigm, it is very important to powerfully jump-start the revival of manufacturing industries. The more advanced manufacturing grows, however, the more automated and digitalized it becomes, with diminishing capabilities for job creation. It is the service industry that can create many jobs. In general, the service industry can generate 16.7 jobs per one billion won (about 887,070 U.S. dollars) in sales, while the semiconductor industry can create 3.6 jobs, and the petrochemical industry 1.9. In other words, the service industry can create up to eight times as many jobs as manufacturing industries, assuming that they have the same sales revenues.

Korea's service industry accounts of about 70 percent of total employment. However, its labor productivity ranks last among member economies of the Organisation for Economic Cooperation and Development and falls short of that of the manufacturing industries. In order to create quality jobs by invigorating high value-added service businesses, there is no other way but to nurture new industries while overcoming resistance from existing businesses. Successive administration attempted to implement regulatory innovations and introduce new industries in order to fuel the growth of the service industry, only to fail due to strong resistance from businesses with vested interests. The failure by Uber and Airbnb, which symbolize sharing economy, to take root in Korea and the dispute over Kakao's carpooling service show how difficult it is to implement regulatory reforms and develop new industries in Korea.

The Kim Dae-jung administration studied the introduction of for-profit hospitals in 2002. However, it took 16 years to permit one on Jeju Island. The introduction of remote medical service has been postponed so far. While Japan has become a major tourist destination in recent years despite its high consumer prices, Korea has seen its trade deficit growing. In order to create jobs, the government needs to draw up comprehensive measures for the service industry, which is under plenty of regulations but benefit less from government support. The government cannot afford to remain reluctant to revive service industry support systems which were pursued by the previous administration. Controversies over whether remote medical services are right or wrong are not appropriate in the complex world of the 21st century. The future of the Korean economy lies in paving way for new industries' growth while reducing its impact on existing businesses.