More growth, fewer jobs

Posted on : 2012-05-31 13:40 KST Modified on : 2012-05-31 13:40 KST
Economy becoming increasingly dependent on manufacturing and exporters

By Park Soon-bin, staff reporter

South Korea’s economic growth is increasingly dependent on manufacturing and large exporters, meaning that fewer jobs are being created, according to recent Bank of Korea figures.The statistics paint a picture of a worsening “jobless growth” situation.

A 2010 inter-industry linkage table released on May 30 by the Bank of Korea showed the year’s employment inducement coefficient to be 12.3, down 1.1 from the year before. This coefficient indicates the number of new jobs generated directly and indirectly for every billion won in final demand. While it does drop inevitably as automatization and mechanization technology advances, the downward trend did halt in 2009.

Consumption accounted for the largest demand area, with a 2010 coefficient of 16, followed by investment with 12.6 and exports with just 7.9 jobs created per billion won.

The reason for declining job creation is attributable to changes to the industry structure. Total supply of goods and services in South Korea for 2010 stood at 3.7 quadrillion won (about US$3.2 trillion), up 13.6% from the year before. Manufacturing output accounted for 50.2% of this, a rise of 2.5 percentage points from 2009 and the first time the percentage has been above 50% since 1988. Meanwhile, the service industry’s percentage dropped from 39.3% to 37.7%, the lowest figure since the 35.8% recorded in 1998.

One salient finding in the manufacturing figures was an increase from 20.6% to 22% in the weight of basic materials industries, including petroleum products, primary metals, and chemicals, as a result of rising international raw material prices. Among assembly and processing industries, semiconductors were up 49.9% from the year before, electronic display devices 29%, and automobile production 26.8%. Together, they combined to increase the weight of manufacturing.

But most of these industries have relatively hire relatively few new workers when demand for their products increases.

Final demand rose to 1.76 trillion won in 2010, up 13% from the 1.56 trillion won recorded in 2009. The percentages of exports and investment in this total rose from 34.2% to 35.1% and from 17.9% to 19.7%, respectively, while that of consumption fell from 47.9% to 45.1%.

Steady increase in international raw material prices over the past few years was a major factor in reducing the domestic inter-industry linkage and production inducement effects. The production inducement coefficient, which shows the effect of a particular unit of increased demand on the industry as a whole, dropped from 1.955 in 2009 to 1.948 in 2008. The forward and backward linkage effects between domestic industry sectors dropped due to a higher dependence on imports and exports for economic growth.

“With the increased weight of the basic materials and high-tech information technology industries, our dependence on imported intermediate materials inevitably increases, and the employment inducement effect of growth inevitably decreases,” said Lee U-gi, head of the input-output team in the Bank of Korea’s economic statistics bureau.

The task confronting the South Korean economy now is the development not only of manufacturing but also services, which have a strong synergy with manufacturing and relatively high job creation potential.

 

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