SEJONG, June 5 (Korea Bizwire) — Lee Tae-in, who completed an engineering degree from a university in February, recently decided to give up searching for a job in the first half of this year in South Korea’s worst economy in more than two decades.
So far, he has applied for several midsized machinery manufacturers but failed.
“Job openings have stopped due to the coronavirus pandemic. Now, I’m afraid I can’t find a job this year,” sighed Lee, 26.
The situation in job markets is even less promising in the second quarter of this year, with many economists predicting the pandemic will deal a heavy blow to employment.
The economy shrank 1.4 percent on-quarter in the first quarter of the year, marking the sharpest quarterly contraction since the last three months of 2008.
In April, South Korea suffered its biggest monthly job losses in 21 years as the coronavirus outbreak and containment measures hammered the economy.
The number of employed people in South Korea stood at 26.56 million in April, 476,000 people fewer than a year ago, marking the biggest on-year decline since February 1999.
The labor force participation rate, which refers to the percentage of those who are aged 15 or older and remain in the labor force by either being employed or actively looking for jobs, also fell 1.6 percentage points to 62 percent in April, according to the data compiled by Statistics Korea.
It also marked the sharpest decline since 2000, when the nation’s job markets were crippled in the wake of the Asian financial crisis.
The nation’s jobless rate fell by 0.2 percentage point on-year to 4.2 percent in April.
Although South Korea’s job market is not as severe as in the United States, where a jobless rate stood at some 15 percent, weaker social safety nets make it harder for unemployed people to brace for the first pandemic in the era of globalization.
Economists said the worst has yet to come in the labor market.
Compared with February this year, the number of employed people plunged by 1.02 million in April, the Korea Labor and Society Institute (KLSI) said in a report.
In comparison, the number of employed people dropped by 920,000 between December 1998 and February 1999, when the Asian financial crisis began jolting the job market.
“The coronavirus pandemic is expected to hit the labor market more than the 1998 crisis,” the KLSI said. “Unless there are unprecedented measures, the pandemic is expected to further deteriorate inequalities in the Korean society.”
While the first-quarter economic contraction was led by private consumption, which shrank 6.4 percent on-year, exports are likely to hit a new low in the second quarter.
To cushion the blow from the pandemic on the job market, the government aims to create 1.56 million jobs in the public sector.
About 1 million jobs in the public sector have not been opened due to social distancing rules, but the government will soon open such jobs by easing some rules, Finance Minister Hong Nam-ki said.
The government will also encourage public firms to create some 550,000 jobs for young people, Hong said.
“Although the government has responded to a weak job market by running a range of job support programs from employment retention and job creation support to unemployment benefits and emergency reliefs, the April data told us that we need to provide jobs to absorb shocks in the labor market,” Hong said.
Hong said job losses in the service sector showed signs of spreading to the manufacturing sector in April, though temporary workers were the hardest hit.
Last month, the National Assembly passed a bill for artists to be included in unemployment insurance.
“We will work to further expand unemployment insurance to platform workers, free lancers and other contract workers. On top of that, we will improve the country’s employment policies taking into consideration growing remote workers and tech jobs,” Hong said.
To shore up the virus-hit economy, the Bank of Korea slashed its policy rate by a quarter percentage point to a record low of 0.5 percent last week.
Earlier this week, the government proposed a third extra budget of 35.3 trillion won (US$29 billion) to minimize economic fallout from the coronavirus pandemic, which includes 3.4 trillion won to be used to fund the employment insurance.
“The South Korean economy is faced with a combination of domestic and externally driven pressures,” Moody’s Analytics said in a recent report.
“While borrowing costs have been reduced to historical lows, the responsiveness of companies remains uncertain,” it said. “This is because of the willingness of companies to retain their workers at a time when cash flows have been severely impacted.
“Fiscal policy is therefore expected to assume a leading role. In this context, while provisions to create additional public sector jobs will yield returns in the medium term, measures such as direct transfers are more necessary in the short term.”