South Korea’s jobless rate surged to a nine-year high last month in the wake of tough corporate restructuring and steep hikes in minimum wages, putting further pressure on the administration of President Moon Jae-in struggling to revive the slowing economy.
The country’s seasonally adjusted unemployment rate jumped to 4.4 per cent in January, the highest since it spiked to 4.7 per cent in January 2010, with the bulk of job losses coming from manufacturing and construction sectors, according to Statistics Korea. The jobless rate in December was 3.8 per cent.
The weak job market and economic slowdown have hit the approval ratings of Mr Moon, who has made job creation a central plank of his growth policy. Economists say aggressive hikes in minimum wages and massive lay-offs in the shipbuilding and automobile sectors have weighed on the job market.
Seoul’s finance minister Hong Nam-ki told a policy meeting on Wednesday that the government would make “all-out efforts” to achieve its goal of creating 150,000 jobs this year.
The initiatives feel long overdue for workers like Baek Sung-jin, a 25-year-old man who used to work for a second-hand car seller. He says he has been struggling to find a new job since last July, and has had to manage with working part-time at a fast-food restaurant. “I’ve been sending my resume to many companies but it is so hard to find a proper job with good conditions,” he said.
Analysts say government policies might be the real reason for the steep rise in unemployed.
“January data suggest that a sharp minimum wage hike at the beginning of the year weighed on hiring, and is likely to depress job creation throughout 2019,” said Alex Holmes at Capital Economics. “The poor health of the labour market is set to act as a major drag on growth this year.”
Low-wage workers in the manufacturing and retail sectors bore the brunt of job losses as the country’s minimum wage rose 11 per cent to Won8,350 ($7.50) an hour this year, following a 16 per cent increase last year. The country has also imposed a strict cap on the working week at 52 hours.
The latest job market data adds to policy challenges for Mr Moon, who has reshuffled his economic team to reinvigorate growth. The South Korean economy grew at the slowest pace in six years last year as exports were hit by China’s slowdown and trade frictions between China and the US, the country’s two biggest export markets.
The data showed that workers in the manufacturing sector were hit the hardest, shedding 170,000 jobs from a year earlier, while retailers and builders lost 67,000 and 19,000 jobs respectively.
The country’s big shipbuilders have shed tens of thousands of workers in recent years as they struggled to stay afloat amid a lack of orders. Many workers in the automotive sector also lost their jobs amid slowing demand. GM Korea closed one of its four factories in South Korea last year.
Economists expect the job market to remain sluggish due to weak consumption and exports. South Korea’s exports fell for a second month in January, down 5.8 per cent from a year earlier.
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