Job growth decreased sharply to 72,000 jobs in May after staying a little over 100,000 for three straight months.
It is the first time since the 1998 financial crisis that employment growth has remained below 200,000 jobs for four successive months.
The unemployment rate was 4 percent last month.
The youth unemployment rate rose to 10.5 percent, an 18-year high for May after related data was compiled in May 2000.
Deputy Prime Minister and Finance Minister Kim Dong-yeon called the May job figures “shocking.”
The employment situation is nearing a dangerous level as economic policies of the Moon Jae-in administration have begun to produce side effects.
Carmakers and shipbuilders lost 79,000 jobs, education service providers 98,000, restaurants and lodgings 43,000 and wholesalers and retailers 59,000.
Restaurants, lodgings, wholesalers and retailers are industries which employ a great number of minimum wage workers.
The figures in the industries show their job losses can be attributed to a drastic hike in minimum wage effective from January.
The number of temporary and day labor jobs also decreased remarkably by 240,000. This indicates that short-term part-time jobs and construction odd jobs are fast vanishing.
The 2018 minimum wage was raised sharply for the sake of low wage earners, but actually it is eliminating jobs for them.
To make matters worse, a shorter workweek set to take effect from July is expected to give the economy and employment situation another jolt.
Nonetheless, the government studiously avoids diagnosing job losses in view of minimum wage, saying vaguely “it is impossible to know correctly that restaurants and lodgings lost jobs due to minimum wage increase.”
It cites aftermath of industrial restructuring and suspension of construction works due to localized torrential rain.
And yet, if minimum wage jobs were created in restaurants and lodgings, employment statistics would have turned out differently.
The government has created public-sector jobs through the injection of fiscal money, but as domestic consumption remains sluggish while manufacturing industries wobble, the problem of declining job growth seems to be getting out of the government control.
Furthermore, this comes against the backdrop of structural issues such as a slowdown in Korean economic growth, a stronger Chinese challenge to Korea’s flagship industries and the spread of trade protectionism.
If things go on like this, employment may even contract rather than grow, as it did during the Asian currency crisis of two decades ago or the global financial crisis of 10 years ago.
Last year, the Moon administration spent 11 trillion won ($9.9 billion) in an extra budget for job creation in addition to the existing 17.9 trillion won related budget. It compiled 19.2 trillion won in an annual 2018 budget to increase employment and yet added 3.9 trillion won in an extra budget last month.
However, job growth is on a decline even after pouring taxpayers’ money this much. This means something fundamentally wrong with the government’s job policy.
The government would be wrong to believe that it has fulfilled its pump-priming role for job creation by making up minimum wage shortfalls in the private sector and supplementing months of salaries for new employees.
It is right for jobs to be created by companies, not by the government. Spending tax to create jobs has its limits and side effects.
Private-sector business among others should pick up first, and then increase in employment and consumption will follow naturally, creating a continued synergy or a virtuous cycle.
Thus, the government must push corporate-friendly policies more actively. It needs to consider offering companies strong investment incentives.
Now is time to work out the right measures after listening to companies, large or small, and experts.
The Korean economy has undergone difficulties while the government has taken many labor-biased policies and followed an experimental ‘income-led growth’ paradigm.
It vowed to create jobs but lost them.
Nonetheless, Moon expressed an intention not to curb the minimum wage increase, saying “90 percent of the effect of the minimum wage hike was positive.”
Job growth has shrunk because the government gave a deaf ear to advices. Economic aides in Cheong Wa Dae must not turn away from the reality that statistics point to.