South Korea’s employment elasticity to GDP growth is expected to fall drastically next year amid a widespread of recession fears and corporate belt-tightening across industries, a report found Sunday.
According to the report released by the Korea Chamber of Commerce and Industry, the nation’s employment elasticity -- the percentage change in employment associated with a 1 percent growth in GDP -- posted a record high this year.
Based on Bank of Korea estimates, this year Korea is expected to see its GDP growth rate hit 2.6 percent and the employment growth rate hit 2.7 percent, respectively.
That means this year’s employment elasticity is 1.04, the highest figure since 1963. The report said an overall increase in youth and elderly employment and a decline in foreign workers due to the pandemic affected the employment rate.
But the figure is projected to fall to 0.24 next year, with the employment growth rate plunging to 0.5 percent.
“Facing weaker profitability and tighter capital market, companies are expected to reduce new hires and adjust their manpower infrastructure, making it difficult for job seekers to get a job,” said Kim Cheon-gu, a researcher at the KCCI.
With a bleak outlook for next year’s labor market, the report pointed out that the nation’s labor market is in need of adjustments. There are too few IT specialists despite the industries' demand for them, and the unemployment rate in face-to-face services is increasing with the services quickly being automated.
To remedy the situation, the KCCI advised that job training and reeducation support should be expanded to the elderly and those with unstable jobs, while adding that "young firms," or companies with relatively short histories such as startups, must be well-supported to create more jobs and maintain the dynamicity in the private sector.
The report also recommended changes to be made to firms' corproate culture, such as allowing more flexible working hour schedules, and compensating employees according to the nature and difficulty of the work, to follow the changing needs of the labor market.