South Korea’s construction industry is facing its worst downturn in years, with employment falling below 2 million workers for the first time since the Covid-19 pandemic. (Image courtesy of Yonhap)
SEJONG, Feb. 25 (Korea Bizwire) — South Korea’s construction industry is facing its worst downturn in years, with employment falling below 2 million workers for the first time since the Covid-19 pandemic, highlighting growing concerns about the broader economic impact of the sector’s prolonged slump.
According to the Statistics Korea, construction employment plunged by 169,000 jobs in January compared to last year, dropping to 1.92 million workers. The decline marks the first time the sector’s workforce has fallen below 2 million since February 2021, during the height of the pandemic.
The impact has been particularly severe among young workers, with employment in the 15-29 age group plummeting by 36.6% year-over-year to just 105,000 workers, the steepest decline across all age groups.
“While construction jobs can be physically demanding, they typically offer above-average wages,” said Joo Won, chief economist at the Hyundai Research Institute. “The recent freeze in new hiring by construction companies appears to be driving the sharp decline in youth employment.”
The industry’s troubles are rippling through the economy. In the third quarter of 2024, households dependent on construction income saw their earnings drop by 3.2% — the largest decline since record-keeping began in 2006 — even as overall household income rose by 3.3%.
“South Korea’s economy has become highly dependent on construction employment, driven historically by urban redevelopment projects,” said Kim Sung Hee, a professor at Korea University’s Graduate School of Labor Studies. “When the construction sector struggles, it inevitably leads to broader economic downturn.”
The government has attempted to stimulate construction investment since last year by easing real estate regulations, particularly in regional areas. However, these measures have shown limited effectiveness due to high interest rates and ongoing project financing difficulties.
On February 19, the government announced plans for the Korea Land and Housing Corporation to purchase unsold housing units to support regional construction markets. Industry experts, however, criticized the measure as inadequate, noting the absence of tax and financial support measures.
The Korea Development Institute (KDI) recently revised its construction investment forecast downward, projecting a 1.2% decline for 2025, compared to its previous estimate of a 0.7% drop. The adjustment reflects deteriorating funding conditions for construction companies and a sluggish real estate market.
“The construction industry’s downturn is likely to persist,” said Kim Kwang-seok, research director at the Korea Institute for Industrial Economics and Trade. “The sector faces multiple challenges — high interest rates, U.S.-China trade tensions, tariff conflicts, and political uncertainties — none of which have easy solutions.”
While some experts suggest increased infrastructure spending could help offset the private sector’s weakness, the government’s ability to respond is constrained by significant tax revenue shortfalls over the past two years.
“Besides interest rate cuts, there are few viable options,” said Jung Kyuchul, director of the Office of Macroeconomic Analysis and Forecasting at the KDI. “While infrastructure investment could help, it would require additional supplementary budgets at a time of fiscal constraints.”
M. H. Lee (mhlee@koreabizwire.com)
