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Opinion pieces on business & economic issues

SOHN Min-Jung

Recent Employment Trends and Proposals

SOHN Min-Jung

May 7, 2010

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The latest GDP reading from the Bank of Korea (BOK) showed a first-quarter rise of 7.8% from a year earlier. While this is partially due to the low base effect of early 2009, the fact that GDP also rose 1.8% from the previous quarter, sharply up from 0.2% in the last quarter of 2009, can be judged that the economy is recovering steadily. Accordingly, recent employment data are also showing improvement. The number of employed people rose by 74,000 in March from February, the second straight month of job growth around 70,000. Furthermore, the jobless rate was 4.1% in March, sharply down from 4.9% in February.

Three notable features have been shaping the recent job market. First, employment sentiment has improved, which should lift employment recovery further. The BOK's Business Sentiment Index for human resources in the manufacturing and non-manufacturing sectors, which measures companies' shortage/excess of employees, was 88 and 91 in April, respectively, below the benchmark 100 and indicating a labor shortfall. Moreover, the gap between employers' salary offers and what job applicants desire is narrowing, easing the mismatch in the labor market. This suggests that private sector jobs may increase going forward.

However, for now, the second feature - weak private sector employment - persists. In March, the private sector shed 45,000 jobs from a month earlier, the first month-on-month decline since September 2009 when 62,000 jobs were lost. The total number of private sector jobs is also discouraging; there were a total of 22.4 million private sector jobs in March, falling short of the 22.47 million in March 2008, before the global financial crisis erupted. Meanwhile, the public sector added 119,000 jobs in March from February, ending a four-month skid, thanks to the government's resumed efforts to create public sector jobs such as its Hope and Work Project. However, the job creation in the public sector will be front loaded in the first half of the year. With the end of aggressive public sector hiring, the nascent employment recovery will likely slow down if the private sector job market does not pick up.

Third, youth (those aged 15-29) employment is still declining. Those in their 50s are leading the recent job growth but young job seekers remain vulnerable to economic conditions and marginalized in the current economic recovery. Three factors are driving the hiring of people in their 50s: their numbers have swelled as baby boomers enter their 50s; they are the chief beneficiaries of the government's job creation projects; and the share of short-term employment of those in their 50s is relatively lower than that of other age groups. The number of jobs created in March increased 267,000 from a year earlier, among which 264,000 jobs, or 98.9%, went to people in their 50s.

Under all these circumstances, it is important to boost employment in the private sector. It should be noted that recent employment indicators may give illusion that jobs have increased in the private sector. The number of private sector jobs increased 192,000 from a year ago, but this is mainly due to a low base effect.

It is crucial to boost employment in small- and medium-sized enterprises (SMEs) that account for 89% of total employment. The central and regional governments and related institutions should be more proactive in supporting hiring at SMEs. A recent survey shows that people seeking jobs at SMEs have difficulty obtaining information about the companies to decide which is the most suitable. Moreover, the government should assist industries whose markets have yet to mature and provide investment incentives for companies promoting business in industries with a mature market. As such, an appropriate policy mix is crucial for simultaneous growth in the economy and job market.

Bolstering employment for younger generations, of course, is another imperative. Support measures would develop the capabilities of young people to enhance their job search, help start-up ventures with innovative ideas, and assist job-search services. More specifically, support should be extended to highly-educated young people in upgrading their job skills. Considerations could include a customized career academy; a "job ability training account program," which would allocate money to young people for job development courses; and a cooperative (co-op) program for both undergraduates and graduates searching for jobs.

Other crucial measures include injecting capital to purchase start-up ideas of young people as well as giving partial financial support in the early stage of starting a business. Finally, considering that young people typically find jobs through family, friends and school connections, it would be crucial to build a career network between schools and companies as well as between regional communities and job service institutions.

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