1st anniversary of Moon government, industry • recruitment • investment lagging behind

President Moon Jae-in, who has taken presidential office on May 10, 2017, was the top priority of the international task of expanding so called `job`. However, one year later, one of the biggest economic problems is still `job`. This is due to companies are reluctant to invest in the country with low labor productivity, high labor stiffness and also various regulations. In the case of there are no regulatory policies, including a minimum wage increase and shortened working hours, there is a strong possibility that `employment-free growth` will continue in the future.

Large corporations such as Samsung, Hyundai, SK and LG have been investing in production facilities mainly in Vietnam, China, and the US, excluding major core products such as semiconductors. The localization strategy is one of the reasons why corporations are investing abroad due to the expansion of protectionism around the world, mainly in the United States.

In fact, foreign direct investment in Korean companies is steadily going up. According to KOTRA, the amount of foreign direct investment remittances last year was USD 43.7 billion, up 11.8% from the previous year (USD 39.1 billion). It is the highest level since 1980, when statistics began to be collected. It is now pointed out that trying to catch two rabbits of quantity and quality of jobs, such as shortening working hours and raising the minimum wage, has encouraged companies to grow without employment. The minimum wage per hour has been raised by 16.4%, which is the maximum wage in 17 years. The government has decided to reduce the weekly working hours from 68 hours to 52 hours starting from July. It is stated that it has increased only to be.

According to the Ministry of Employment and Labor, the rate of increase in the number of employees with 300 or more employees as of March last year was 1.6%, which is similar to 1.8% in March 2003. However, the rate of increase in the number of employees with less than 300 employees went down by 0.9 % points from 1.3%. The unemployment rate rose to 4.5 % in March, up 0.4 % points from a year earlier as companies did not increase recruitment. It is the lowest since 2000 when the unemployment rate started to rise (4.4 %). The youth unemployment rate soared to 11.6% during the same period.

Meanwhile, the performance of major companies is not bad. The operating profit of 100 companies that announced their first quarter results was KRW 38.705 billion, up 19.4% from the same period last year among the top 500 companies.

The business community considers that there is a limit to investment and employment expansion centering on existing manufacturing. The investment is focused on manufacturing automation of manufacturing such as smart factories. It is not effective to increase employment. Especially, automobile parts and semiconductors, which are leading the economic recovery, are mostly automated, and about half of the major manufacturing equipment is dependent on foreign products.

The Korean government is pushing for a new business investment of companies through imposing regulations such as corporate income tax increase and strengthening separation of the financial industry. The Fair Trade Commission is now pushing major corporations to spend tens of trillion won in their governance restructuring. There is a negative effect on companies` investment in new business.

On the other hand, there is also concern that the downward trend in the construction market, which has led economic growth since 2015, will affect the unemployment rate. LG Economic Research Institute predicted that the number of unsold homes will increase to more than 60,000 this year as housing supply shortage due to massive investment in the past three years is filled.

The business community has question marks on the government`s plan to foster innovative industries and deregulation. The government announced last year that it would invest KRW 7.9 trillion in 13 growth engines by 2022 to create more than 550,000 jobs. However, detailed plans for each sector are not available until March this year.

Ongoing jobless growth means a continuum of suffering for the youth of this land right now. The Presidential Job Commission has predicted that the youth population aged 25-29 would go up by 388,000 people from 2017 to 2021. But, it is pointed out that there are not many high-quality jobs for them. "The public-based job creation policy is limited," stated a business expert. "We need to create an environment where we can do it to encourage voluntary employment expansion by the private sector."

By Park Jung Il comja77@


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