Labor Market Trends of 2011 and Outlook for 2012

1. Labor Market Trends of 2011 and Outlook for 2012
 
As of October 2011, the number of employed persons increased by 407,000 year-over-year (YOY), paving the way for the Korean government to increase its target of 330,000 jobs. Still, the employment-to-population ratio is at a near standstill due to continuous labor market inflexibility.
Between January and October 2011, the monthly employment average was 25,099,000 people, up 407,000 YOY. The number of waged workers increased by 443,000 while the number of unwaged workers (including the self-employed and unpaid family workers) decreased by 36,000, as a result of the increase in salaried positions.
The average unemployment rate stood at 3.5%, down from 3.7% for the same period in 2010, while youth unemployment seems to be stabilizing at 7.7%. As of October 2011, the employment-to-population ratio was 59.1% (among those aged 15 to 64, 63.8%), slightly higher than last year.

【Table 1】 2011 Employment Trends
Units: thousand persons; %; (YOY)
2010
Jan. to Oct.
2011
July 2011
Aug. 2011
Sept.
2011
Oct. 2011
Employed persons
323
407
335
490
264
501
-Waged workers
517
443
439
462
275
430
-Unwaged workers
-194
-36
-104
28
-11
71
Employment-to-population ratio (%)
58.7
59.1
60.0
59.6
59.1
59.9
– Youth (15 to 29)
40.3
40.5
42.0
41.3
40.1
40.2
Unemployment rate
3.7
3.5
3.3
3.0
3.0
2.9
– Youth (15 to 29)
8.0
7.7
7.6
6.3
6.3
6.7
As the overall employment situation shows visible signs of improvement, the labor market seems to be on a steady path to recovery. Still, the employment-to-population ratio in Korea is lower than other advanced countries (as of 2010, the OECD average was 64.6%; Germany 71.2%; the UK 70.3%; the Netherlands 74.7%) and it is estimated that there are a significant number of potentially unemployed persons who were not included in the statistics. In addition, due to the inflexible labor market, irregular workers accounted for 34.2% (5,995,000) of waged workers as of August 2011, unchanged from recent years.

【Figure 1】 2010 OECD Employment-to-Population Ratios (aged 15 to 64)
2011 Nov
This year has seen some changes in the unemployment insurance system and policies designed to increase birthrate and slow down the aging of Korean society. As part of the 2nd Basic Plan responding to low birthrate and the aging society for 2011 to 2015, the monthly childcare leave benefit was increased from 500,000 KRW to 40% of a mother’s monthly salary in January. Furthermore, the required contribution to employment insurance as a percentage of monthly salary was raised from 0.9% to 1.1% in April, as the funds available presently for employment insurance have proven to be insufficient. Then in June, revision of the Employment Insurance Act, allowing the self-employed to sign up for employment insurance, passed the National Assembly in consideration of the current economic downturn. This law will go into effect from 2012.


In 2012, employment is likely to be Korea’s top social priority. Ahead of the 2012 general and presidential elections, the
support for vulnerable groups (youth and irregular workers, etc.) are emerging as major issues.
Under the recent economic recession in the US, and the debt crisis around Europe, major think tanks forecast next year’s economic growth to be weaker than this year’s. Consequently, the number of new jobs created in 2012 is estimated to decrease to 200,000 from this year’s 340,000. This reflects the decline in demand from the US and Europe for Korean exports.
Although major employment indicators continue to be positive, deepening polarization and serious youth unemployment have been highlighted as major problems in the Korean labor market. Thus, protection for vulnerable groups will be important issues in the upcoming general and presidential elections in 2012.
In September 2011, comprehensive measures for non-regular workers proposed by the Korean government and the ruling Grand National Party were announced. Consequently, strengthened protection for in-house subcontract workers and introduction of affirmative actions are likely to impose a greater burden on companies. In-house subcontract workers are mainly employed in manufacturing (such as shipbuilding and car making), so additional legal intervention in this area will upset the HR management of manufacturing companies.
The government aims to reconcile family and work through its employment policies for female workers and measures to cope with the low birthrate. With attempts to extend maternity leave and require employers to have on-site childcare facilities, the burden on companies will increase. The government allows part time work and a flexible working hour system, but companies are unlikely to follow suit, due to excessive regulation on dispatch and temporary employment, and employer reluctance to use substitute workers. Responding to the growing employment-to-population ratio of middle-aged people (including the baby boomer generation), the government may intervene in this area too.
Although education is increasing, there is a great mismatch between supply of manpower between the ages of 15 and 29, and demand for labor. Despite a recently stabilizing youth unemployment rate of 6%, the employment-to-population ratio of the youth (aged 15 to 29)   remains around 40%. This means that a number of young people have given up looking for work or have chosen to leave the labor market, due to the lack of demand for labor.
In the coming year, controversial discussions on whether to introduce a youth employment quota are expected to continue. However, forcing companies to hire young people regardless of labor demand is not a sustainable countermeasure against high youth unemployment. Mandatory equal treatment of workers regardless of academic background may also be an issue next year, as the government is likely to require companies to hire more high school graduates in 2012.


Against the backdrop of economic downturn,
making its labor market more flexible is urgent to improve employability.
There are concerns that slow economic growth will hinder an already depressed Korean labor market in 2012. We did our upmost to minimize job losses during the 2008 global economic crisis by increasing public spending on job creation and job sharing. For more job creation, the government needs to remove the factors that cause an increase in the use of non-regular workers as well as be prepared for economic changes.
Along with increasing labor market flexibility, the competitiveness of companies has to be strengthened through flexible management that includes reasonable relocation. Through innovation of the workplace, working hours can be reduced and the current rigid working time system can diversify. Such efforts will greatly help the creation of more jobs and improve the quality of life for employees.

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