Data released last week by the state statistics agency showed that on-year job additions in August recorded the largest increase in 29 months. The number of employed people in the country reached 27.35 million last month, a rise of 452,000 from the same month in 2018.
The unemployment rate also dropped 1 percentage point on-year to 3 percent in August, marking the lowest level for the month since 2013, according to figures from Statistics Korea.
Hong Nam-ki, the minister of economy and finance, said the improved data was “very encouraging” and that the government would make efforts to ensure the positive trend continued.
But closer scrutiny shows that the data doesn’t reflect the actual job market.
Nearly 90 percent of jobs added in August were taken by people over 65, most of whom landed government-subsidized temporary jobs.
By contrast, the number of employed people in their 30s and 40s, usually the backbone of the workforce, fell by 9,000 and 127,000, respectively, last month, recording the 23rd consecutive month in which both had declined.
The steep rise in August resulted from a low base effect, as the on-year increase in the number of employed people in the same month in 2018 remained at a mere 3,000.
The quality of the jobs added last month is also a matter of concern.
Most were low-paid temporary posts created with government funding, including 174,000 in the health and social welfare sectors.
But the kinds of jobs sought by young and middle-aged job seekers have continued to decline in number.
The manufacturing industry, which accounts for nearly 30 percent of the country’s gross domestic product, shed 24,000 jobs in August, marking the 17th consecutive month of decline. The financial and insurance sectors saw a loss of 45,000 jobs last month.
The government is planning to increase spending to create 130,000 more jobs for aged people next year. But an increase in temporary jobs for senior citizens, such as weeding neighborhood parks and sweeping out outdoor traditional markets, does little to reinvigorate the economy and improve labor productivity.
Despite the lower unemployment rate, the country’s economy remains sluggish, with major economic institutions at home and abroad painting a gloomy picture.
The composite leading indicator for July released recently by the Organization for Economic Cooperation and Development placed Korea’s economy at 98.79, down 0.08 points from the previous month. The indicator, designed to anticipate turning points in economic activity six to nine months in advance, has fallen for 26 consecutive months for Korea, the longest streak of decline. A reading above 100 points to an upturn in business cycles, with a reading below the benchmark figure suggesting a downturn.
The most reliable way of increasing employment is to make it easier and cheaper for employers to hire and fire. Deregulation also helps companies increase investment and employment by lifting barriers to new business.
But President Moon Jae-in’s administration has dragged its feet on labor and regulatory reforms, while raising corporate taxes and the minimum wage and taking other measures that have put heavier burdens on companies.
These policy risks have led businesses to pile up cash, deferring or canceling investment decisions.
Concerns over economic uncertainties have made consumers tighten their purse strings, with retail sales decreasing for two consecutive months from June. Sluggish consumption has further reduced corporate production and investment.
There is a limit to the number of jobs that can be created by expanding government spending.
The country’s ratio of budget deficit to GDP is set to jump to 3.6 percent next year from 1.9 percent this year, if the government issues state bonds worth 60 trillion won ($50.2 billion) in 2020 as planned. The ratio is expected to hover around 3.9 percent for the following three years.
Compared with the EU’s limit of 3 percent of GDP, the increase would be too steep to ensure the country’s fragile fiscal soundness.
The government is in no position to be encouraged by what it sees as improved jobs data, which was made possible by unsustainable government spending. It should be remembered that jobs, particularly permanent ones, will be created consistently when companies are convinced that pro-corporate policy will be implemented robustly and thus they need no longer be afraid to hire.