Published : 2013-02-25 19:40
Updated : 2013-02-25 19:40
Five years ago, President Lee Myung-bak unveiled his “747 plan,” declaring that he would achieve 7 percent annual economic growth during his term to boost the nation’s per capita GDP to $40,000 and make Korea the world’s seventh largest economy.
What Lee has actually achieved over the past five years falls far short of these goals. The economy has grown a mere 2.9 percent on average; the nation’s per capita GDP barely reached $22,700 in 2012; and Korea’s economy was the world’s 15th largest last year.
The new government of President Park Geun-hye offers no such quantitative macroeconomic targets. Park has shifted the focus of economic policy from the growth of the national economy to promotion of individual happiness.
The shift reflects her realization that the expansion of the national economy does not necessarily translate into increased happiness of individuals.
Nevertheless, the new government does offer one macroeconomic policy goal ― boosting the nation’s employment rate to 70 percent by 2017. This objective is just as ambitious as Lee’s discredited 747 plan.
Last year, Korea’s employment rate ― the proportion of the working-age population that is employed ― stood at 64.2 percent, below the OECD average of 65 percent.
According to the Ministry of Strategy and Finance, the nation’s economy needs to add about 500,000 new jobs each year to attain the employment target five years later.
If past experience is any guide, this is a tall order. Since 2000, there has only been one year when annual job growth exceeded 450,000. In 2002, the economy created 597,000 new jobs.
Last year, job creation totaled 437,000, the highest level since 2002. It was the second consecutive year that the figure exceeded 400,000 following 415,000 in 2011.
Yet it is doubtful that such high levels can be maintained down the road. The large increases were driven mainly by retiring baby boomers who launched their own businesses, mostly in low-paying service sectors such as retail, to earn a living.
As these segments are already crowded, they have little room to accommodate a large number of new entrants. Hence the gloomy forecasts for this year’s job market.
The Finance Ministry has projected job growth will fall to 320,000 this year. Research institutes have presented similar figures.
As the ongoing low-growth period is feared to continue for some time, job creation will become all the more difficult. This year, the economy is expected to grow 2.8 percent, higher than last year’s 2 percent but much lower than its potential growth rate of around 4 percent.
To create more jobs, the new government should first help the economy grow to its full potential, given that a 1 percentage point increase in the nation’s growth rate tends to generate about 90,000 new jobs.
The government’s biggest challenge on the job front is to reverse the downward employment trend in young people.
Last year, while the nation’s average employment-to-population ratio inched up from 63.8 percent to 64.2 percent, that for people in their 20s fell from 58.5 percent to 58.1 percent.
To tackle the youth employment crisis, the new government plans to set up a presidential commission to take charge of policies related to young people.
One thing the envisioned Youth Commission intends to do is to develop an index to assess the efforts of large private corporations, public agencies and local governments to create jobs for young people.
It also plans to launch various programs for young job seekers. For instance, it will provide training and subsidies to talented young people to help them find employment in advanced countries.
More than anything else, the commission needs to come up with measures that would make jobs at small and medium-sized enterprises attractive to college graduates. Many job seekers fresh from campus shun SME jobs because of their low wages and unfavorable working conditions.
Making SME jobs appealing to these job seekers would not only boost the youth employment rate but help SMEs hire workers who can contribute to improving their competitiveness.