At just 3 per cent, South Korea’s jobless rate should be the envy of many advanced countries suffering from high unemployment in the global economic slowdown. But many young South Koreans find the job market tough to crack, while the country’s rapidly ageing population presents a headache to policy makers keen to maintain high rates of economic growth.
May’s 3 per cent unemployment rate compares with 7.3 per cent in the US and 27.1 per cent in Spain. But youth unemployment remains high at 7.4 per cent for 15-29 year-olds. With nearly 80 per cent of high school leavers going to university, many university graduates struggle to land a decent job. Youth unemployment is a big concern for the government as it strives to increase overall employment to 70 per cent by 2017 from 60 per cent today.
“We have to boost our growth potential to 4 per cent [from 3.5 per cent today] to achieve the 70 per cent employment target,” Cho Won-dong, the president’s economic adviser, told ruling party lawmakers on Tuesday, saying about 250,000 new jobs would be created annually if the economy grew at 4 per cent a year. “We should change our economic structure towards the creative economy to achieve growth with employment,” he added.
The Korean economy has seen “growth without employment” since the 1990s, the finance ministry says. Big manufacturers have not hired as many people as they used to because of automation and overseas production, while SMEs and the service sector, which account for 90 per cent of jobs, suffer from low productivity. Employment among women remains low at around 50 per cent, far below the OECD average of 65 per cent, as most workplaces are dominated by males working the longest hours among the OECD countries, to retire early at around the age of 55. .
The low participation of female workers, high youth unemployment and early retirement of baby boomers make it “fundamentally difficult” to achieve 70 per cent employment, the finance ministry admits. But its has high hopes of the so-called “creative economy” as the government plans to pour billions of dollars into SMEs to create a venture boom, and as it seeks to advance the under-developed service sector through deregulation. The government says research and development spending for the service sector will be doubled by 2017 from Won76.7bn ($68m) last year.
The government also plans to reduce average annual working hours by 200 to 1,900 hours by 2017 to boost job creation. And it is trying to introduce more flexible working hours and create a family-friendly work environment to increase women’s participation in the labour force.
But experts say it will not be easy for South Korea to increase its growth potential and achieve 70 per cent employment, given the country’s slowing economic growth and its demographic challenges. “The government can create more jobs by developing the service sector and overhauling SMEs, but there is a limit in such domestic reform efforts,” says Lee Sang-jae, economist at Hyundai Securities. “The country’s economic growth is basically driven by exports, which are heavily influenced by external conditions. Unfortunately, external conditions are beyond its control.”
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