Employment data released last week was embarrassing for President Moon Jae-in’s administration, which has vowed to put its top policy priority on job creation.
The number of employed people in the country fell by 982,000 from a year earlier to 25.8 million last month, according to the data from Statistics Korea. It marked the steepest on-year decline since December 1998, when South Korea lost 1.28 million jobs in the aftermath of the 1997-98 Asian financial crisis.
The country has reported job losses every month since March, recording the longest streak of contractions since the number of employed people decreased for the 16th consecutive month in April 1999.
The number of jobless people reached 1.57 million last month, the largest since June 1999, when the state statistics agency began compiling related data.
The country’s jobless rate rose by 1.6 percentage points on-year to 5.7 percent in January, the highest on record for the month since 1999. The unemployment rate for young people aged between 15 and 29 came to 9.5 percent last month, up 1.8 percentage points from the year before. The actual youth jobless rate, which counts in those who work less than 36 hours per week or have given up looking for jobs, soared to a record 27.2 percent.
Government officials attribute the bleak data for January to a tightening of social distancing rules amid a flare-up in novel coronavirus cases, which resulted in massive job losses in face-to-face service sectors.
But the data should rather be seen as suggesting that the Moon administration’s push to create jobs with taxpayers’ money has reached its limits.
Last year, the government spent 3 trillion won ($2.71 billion) adding 950,000 jobs, most of which were temporary ones for senior citizens. The completion of the employment program funded by state coffers revealed the harsh reality of the nation’s job market.
The number of employed people declined across all age groups for the first time since December 1998, with the figure for employees in their 30s falling by the most at 273,000. Notably, the number of employed persons aged 60 or above, which grew at a monthly average of 375,000 last year, dropped by 15,000 in January.
It should be noted that the country’s employment conditions began to deteriorate even before the coronavirus outbreak, as the Moon government imposed stricter regulations on corporate activity and took a set of pro-labor measures, including steep minimum wage hikes and a rigid implementation of the shortened workweek.
A continuous decrease in earned income, particularly of low-wage workers, has widened the income gap in the country in recent years.
Finance Minister Hong Nam-ki, who doubles as deputy prime minister for economic affairs, last week outlined a plan to create about 900,000 jobs in the first quarter through cooperation between central and local governments. He said the job market probably hit the bottom in January and would likely improve down the road in light of antivirus efforts and economic recovery.
But his diagnosis of the country’s employment conditions seems too complacent.
A continuous adherence to the misguided policy to focus on job creation with taxpayers’ money would do little to solve or ease the nation’s worsening unemployment problem.
In the coming months, the government might be able to put forward better employment figures on the back of the resumption of fiscally sponsored job programs. But it is only a matter of time for job figures to worsen again.
The Moon administration’s ill-conceived policy has particularly frustrated young job-seekers, who are struggling to find opportunities to land more secure and well-paid jobs.
It should step up efforts to forge business-friendly conditions by accelerating deregulation and readjusting pro-labor measures to encourage private firms to increase investment and add jobs preferred by young people.
A policy shift is all the more necessary as there will be little fiscal room for funding employment programs down the road. Korea’s tax revenues decreased by 7.9 trillion won in 2020, mainly due to a sharp reduction in levies collected from corporations. Its national debt is projected to reach nearly 1,000 trillion won by the end of this year due to expanded budget spending amid a decline in tax revenues.
With slightly over a year left before he leaves office, Moon needs to redress his administration’s misguided policy, if he wants to avoid being criticized for making the jobless problem chronic and structural.