Unemployment in South Korea

The unemployment rate in the Republic of Korea as of April 2019 is 4.8 per cent, or about 1,197,000 people.[1] Since its rapid globalisation and democratisation, the unemployment rate has been comparatively low compared to most OECD countries. However, in the past decade, the unemployment rate has been rising steadily, going against the OECD average of a 1.6 percent drop over the same amount of time. Despite being Asia’s fourth-largest economy, the country's booming exports are mostly due to major manufacturing companies relying on outsourcing lower-paid roles to mitigate the country’s mandatory minimum wage increase, and automating the majority of manual jobs as the country’s technological boom sends South Korea to the top of the International Federation of Robotics (IFR)’s robot density list - 631 robots per 10,000 employees. Cultural issues such as the gender pay gap and historical views about the role of women and men in the workforce and at home are also contributing to rising unemployment rates as there is a push for contractual, non-standard work and self-employment to compensate for the continual minimum wage increase set by the South Korean government. The emphasis on higher education in the Republic of Korea further raises the unemployment rate due to many young adults choosing to complete tertiary and further qualifications as opposed to immediately joining the workforce.[2] There are also several measurement differences between the standard of measurement set by the International Labour Organisation and the official measurement of unemployment in the Republic of Korea, set by Statistics Korea, that contribute to an inflated unemployment rate when compared to other countries that abide more strictly by the standard set by the International Labour Organisation.

Flag
CapitalSeoul
Official languagesKorean
Demonym(s)Korean
Area
 Total
219,155 km2 (84,616 sq mi)
Population
 Estimate
51,446,201 (27th)
GDP (PPP)2018 estimate
 Total
3.139 trillion
CurrencySouth Korean Won (KRW)
Today part of Korea

The official measurement of unemployment by the Republic of Korea differs slightly from the international standard set by the International Labour Organisation, and this may skew the rate in different directions.

Definition and measurement of unemployment

In 2018, the unemployment rate in the Republic of Korea hit its highest level since the Global Financial Crisis, peaking at 4.4 per cent.[1]

Unemployment in South Korea is measured by Statistics Korea. The definition of an officially ‘unemployed person’ used for data collection by the Republic of Korea is a person aged 15 and over who:

1.    Had no employment during the reference week

2.    Had actively sought employment at some time during the previous four weeks

3.    Was able to start work immediately during the reference week.[3]

This definition is based on the recommended definition from the International Labour Organisation (ILO), allowing the unemployment rate in the Republic of Korea to be measured comparably to other countries around the world.

The unemployment of the Republic of Korea rate is defined as the percentage of unemployed persons in the economically active population.

Unemployment rate = (unemployed persons / economically active population) x 100[3]

The ‘economically active population’ is (employed persons + unemployed persons) are over 15. By comparison, the ‘economically inactive’ population refers to people aged 15 or older who are neither employed nor unemployed during the survey reference period.[3]

History and development

Since undergoing rapid economic development in the 1960s, the Republic of Korea's unemployment rate had been consistently low[4] After processes of democratization in the late 1980s, Korea saw a sharp increase in labour participation, and hence a lowered unemployment rate. From the 1980s until the 1998 Asian Financial Crisis, the unemployment rate averaged approximately 2.3 per cent.[5] The 1998 Asian Financial Crisis saw the unemployment rate skyrocket to 7 per cent, totalling 1,490,000 people. Comparatively, the 2008 Global Financial Crisis had minimal effect on South Korea, with the unemployment rate rising from 3.16 per cent to 3.64 per cent.[1] From 2008 to 2013, the unemployment rate remained relatively steady, averaging at 3.4 per cent.[1] In the past 5 years, however, it has been steadily rising, and as of 2019 is at 4.8 per cent, the highest unemployment rate since the Asian Financial Crisis

Republic of Korea unemployment rate

The Republic of Korea unemployment rate as of April 2019 is 4.8 per cent, or 1,197,000 people[1]

Causes

Economic decline

The rapid dip in employment levels coincided with new government policy mandating a higher minimum wage, causing employers to shun lower-paying jobs, particularly in the manufacturing, retail and construction industries.

In 1953, the Republic of Korea passed the Labour Standard Act in order to protect workers’ rights. Despite this, a minimum wage was not regulated until 1986. The minimum wage was then raised in 2001 by 16.8%, and again in 2018 by 16.4%, to 7530 won (US$7.03) per hour. Most recently, it was raised in January 2019 to 8350 won (US$7.46) per hour. This is argued to have led to a drop in low-paying jobs across many different sectors.[6] Jobs in manufacturing declined by 170,000 jobs in a year. The construction sector lost 19,000 jobs, and the retail sector cut 67,000 jobs. With many companies using the raising minimum wage to cut various traditionally low-paying jobs due to rising costs of labour, the unemployment rate has risen to reflect this concept. Lobby groups representing many small-businesses within the country have since made statements saying that they will not accept the raise in minimum wage due to them needing to cut staff jobs in order to make a profit.[6]

Outsourcing

Outsourcing is the collection of goods by contract from an outside supplier. At 22% in 2015, the rate of temporary, outsourced contract workers in the Republic of Korea was double the OECD average. Workers under these systems are also earning 54% of what regular employees earn from similar work.[7] Furthermore, there is critical concern that current labour protection mechanisms do not serve to protect these new types of workers.[8] This, combined with the idea that contracts will end once the task is completed, contributes immensely to the growing unemployment rate at any one time of survey.

Outsourcing also involves moving business overseas. The continuous increase of the minimum wage in the Republic of Korea has prompted firms to relocate their factories overseas to lower-wage rate countries in order to save costs.[9] This is called the "macroeconomic theory of internalisation". Korean technology company Samsung Electronics has suffered from a "technological hollowing out" (기술 공동화) and "technological disconnection (기술 단절).[9] "Technological hollowing out" is defined as a situation in which essential parts of a technological creation process are not available inside a home/domestic territory. "Technological disconnection" refers to a situation where specific technologies or manpower are available in the domestic territory, however there is no successor to that information, thus ending the execution of the technological product. Samsung has recently generated a substantial amount of media coverage for outsourcing to China, where workers are paid less for longer hours.[10] As a result of this outsourcing there has been a steady decrease of labouring jobs on the production lines of Samsung and other bigger production companies.[9]

Technology

The OECD Youth Unemployment Rate in South Korea, 2001-2016

South Korea is at the top of the International Federation of Robotics (IFR)’s robot density list - 631 robots per 10,000 employees. For example, Lotte Department Stores, one of the largest retailers in Korea, has recently built a technologically-driven counter service system, replacing sales staff.[7] The automation of these jobs has driven workers to jobs that are not yet automated, making it extremely competitive to be hired. For jobs that do not require qualifications, such as basic hospitality jobs, there could be one availability for 4500 applicants.[7]

Despite the rapid technological advancements of workplaces in South Korea, In January 2019 it was reported that the ICT sector had gained 94,000 new job openings in that month alone.[11]

Gender inequality

A multitude of practices concerning gender inequality has led to a larger unemployment rate of women in the workforce of South Korea. Employment discrimination, private sector policies and a lack of women's bargaining power in employee relations emphasised by both State and private policy all contribute to the unemployment rate.[12] In 2010, Korea had the third-lowest gender gap in employment out of 34 OECD countries, with 62.3% of women between the ages of 25 and 65 employed.[13] Economists put this large gap down to traditional Confucian beliefs continuing to hold strong within Korean society, where the family unit is the most important aspect of one's life.[14] This belief fosters continued gender segregation in the labour force. Combined with a lack of childcare centres, difficulties negotiating wage, and an already-existing gender wage gap, South Korean women are vastly under-employed.[15]

Preference for higher education

The Republic of Korea maintains one of the highest rates of educated populations in the world.[16] According to the Organisation for Economic Cooperation and Development (OECD), approximately 70 per-cent of 25-34 year olds in the Republic of Korea have completed some form of tertiary education.[2] Between the early 1980s and mid-2000s, the country's tertiary education rate had increased to five times its original rate.[17] The graduates of top Korean Universities overwhelmingly hold high-ranking positions within government, business and industry.[18] This devotion to learning, however, skews the unemployment rate as many young adults because technically unemployed due to their decisions to remain in schooling. The hyper-competitive nature of the Korean education system prompts some students to study over 16 hours a day at school, before-school and after-school programs called hagwons (학원).[19] As a result, students that also hold jobs are rare, vastly increasing the unemployment rate.

Measurement differences

The methods used to measure the Korean unemployment rate, as measured by Statistics Korea, is slightly different to the method used by other OECD countries. The Republic of Korea's 'economically inactive' population is thought to be hiding a large number of individuals that are employed to the standards of the International Labour Organisation, but not the official Korean measurement system.[20] Individuals over the age of 15 who are neither employed nor unemployed, housewives who primarily act as caregivers, students attending school, and volunteers are included in the 'economically inactive' population and do not contribute to the official unemployment rate.

A large difference occurs when considering 'unpaid family workers'. In accordance with the International Labour Organisation standards, unpaid family workers who work more than one hour per week are categorised as employed. However, the official Korean measurement will only consider unpaid family workers to be employed if they work more than 18 hours in any given week.[3] The individuals who fall into this 17-hour difference between the two measurements are classified to be within the Republic of Korea's 'economically inactive' population. When unpaid family workers are included in calculations in accordance with the International Labour Organisation, the unemployment rate decreases by approximately 0.1 per cent and the employment rate increases by about 0.4 per cent.[20]

Under the International Labour Organisation Standards, individuals who are awaiting assignment from their companies, are seasonal workers not immediately working or who are in similar situations are considered to be employed depending on the specific company they work for. In the Republic of Korea, however, all workers in those situations are considered unemployed (4000 in 2008).[20]

The definitions of 'job-seeking' also differ in the Republic of Korea. Individuals who list 'schooling' or 'higher education attendance' or 'gaining professional qualifications' as a job-seeking activity when considering their employment status would be considered to be "actively job-seeking" under the International Labour Organisation. However, the Republic of Korea defines those individuals as 'economically inactive', with the number amounting to approximately 600,000 individuals.[20]

References

  1. "South Korea: Unemployment Rate". The Global Economy.
  2. "Education attainment - Population with tertiary education - OECD Data". theOECD. Retrieved 2019-06-06.
  3. "Statistics Korea". kostat.go.kr. Retrieved 2019-05-15.
  4. https://www.legco.gov.hk/yr99-00/english/sec/library/e21.pdf
  5. https://www.adb.org/sites/default/files/publication/156069/adbi-wp214.pdf
  6. "South Korea's jobless rate jumps to 9-year peak as minimum wage hike roils labor market". CNBC. 2019-02-13. Retrieved 2019-05-13.
  7. Kim, Jung Min. "Victims of Efficiency". Far Eastern Economic Review. 167: 28–30. ProQuest 208247398.
  8. Lee, Jong-Woon (2014). "Labour Contracting and Changing Employment Relationships in South Korea". Development Policy Review. 32 (4): 449–473. doi:10.1111/dpr.12063.
  9. Lee, Keun (26 August 2016). Economic Catch-Up and Technological Leapfrogging. Edward Elgar. ISBN 978-1-78536-792-2.
  10. "Samsung says to fix outsourcing issues, but keep most production..." Reuters. 2012-11-30. Retrieved 2019-06-06.
  11. Herald, The Korea (2019-02-13). "S. Korea's unemployment rate hits 4.5% in January". www.koreaherald.com. Retrieved 2019-06-06.
  12. Seguino, Stephanie (December 1997). "Gender wage inequality and export‐led growth in South Korea". The Journal of Development Studies. 34 (2): 102–132. doi:10.1080/00220389708422513. ISSN 0022-0388.
  13. Kang, Sung-Jin (2015). "Lags and Leads in Life Satisfaction in Korea: When Gender Matters". Feminist Economics. 21: 136–163. doi:10.1080/13545701.2014.967708 via Routledge.
  14. "Confucianism | Meaning, History, Beliefs, & Facts". Encyclopedia Britannica. Retrieved 2019-05-16.
  15. Rudolf, Robert. "Employment, Well-Being and Gender: Dynamics and Interactions in Emerging Asia". Göttingen Studies in Development Economics. 35.
  16. "Education in South Korea". WENR. 2018-10-16. Retrieved 2019-06-06.
  17. "School enrollment, tertiary (% gross) | Data". data.worldbank.org. Retrieved 2019-06-06.
  18. "How the ´SKY´ universities dominate". Korea JoongAng Daily. Retrieved 2019-06-06.
  19. Singh, Ana. "The "Scourge of South Korea": Stress and Suicide in Korean Society". Retrieved 2019-06-06.
  20. Hwang, Soo Kyeong (2012). "Measurement of Unemployment and Extended Unemployment Indicators in Korea*". Korean Social Sciences Review. 2: 131–179. ProQuest 1314793469.
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