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Manufacturing downturn widens wage gap between capital region and provinces

Manufacturing downturn widens wage gap between capital region and provinces

Posted November. 25, 2023 08:04,   

Updated November. 25, 2023 08:04

한국어

Since the mid-2010s, the manufacturing sector's decline has led to fewer jobs, widening the wage gap between the Seoul Metropolitan region and other areas. In these non-capital regions, the faltering manufacturing sector, once the local economy's mainstay, has resulted in the loss of quality jobs. On the other hand, in the capital region, the rise in well-paying jobs, especially in the information and communication industry, has further increased this gap.

The Korea Labor Institute's analysis shows that the average wage difference between workers in the capital and non-capital areas grew from 6.6% in 2015 to 9.8% in 2020. The manufacturing slump in non-capital areas caused a drop in relatively high-paying, quality jobs, leading to a decline in service sector employment as well. The gap has widened not just in wages but also in employment and growth rates, intensifying the migration of young people from non-capital to capital regions.

Up until the 2010s, major manufacturing industries such as automotive, shipbuilding, and steel played a pivotal role in supporting regional economies. However, issues such as the shipbuilding industry's decline and the closure of facilities, including the Korean GM Gunsan plant, have turned non-capital manufacturing cities into areas of employment and industrial crisis. The industrial shift towards knowledge-based sectors centered in the capital region has undermined the industrial base in other regions, deepening their crisis.

As the provinces see a decline in quality jobs and an acceleration in population outflow, the divide between the capital region and the provinces becomes more pronounced. This situation could potentially weaken national competitiveness through regional decline. The Bank of Korea points out that the concentration of young people in the capital region not only undermines the industrial and growth potential of non-capital areas but also contributes to a lower overall birth rate.

Despite South Korea being a powerhouse in manufacturing exports, its competitive edge is not as strong as before. Last year, seven out of the top 10 export items, including semiconductors, machinery, automobiles, and petrochemicals, saw a drop in competitiveness in the global market. The declining number of manufacturing jobs over the past 10 months signals a reduced capacity for job creation. The country needs to focus on enhancing the sector to remain competitive in global manufacturing. Policies need to revamp old industrial sites and existing manufacturing hubs into centers for high-value, innovative industries. Significant deregulation and tax incentives are crucial to motivate companies to move and invest in local manufacturing bases. Without rejuvenating the manufacturing sector, breaking out of low growth and improving job and income prospects remain challenging.