Employment Growth Halved from 210,000 to 108,000… Job Market Lags as Semiconductor Focus Deepens

Although the Korean economy has continued to grow this year, led by the semiconductor sector, there are warnings that the job market is in fact cooling rapidly. This analysis suggests that, while production has increased due to semiconductor-driven growth, its impact on job creation has been limited. The slowdown has been attributed independently to sluggish domestic demand, weakness in non-semiconductor industries, and a decline in new hires among younger workers.

On August 9, the Korea Labor Institute stated in a recent report that it had more than halved its projection for the annual increase in employed persons this year, lowering it from 210,000 to 103,000. In the first half of the year, employment increased by 183,000 in the first quarter, but in the second quarter the increase slowed to just 32,000.

The primary factor identified is the limited job creation effect of growth centered on semiconductors. Semiconductors are a representative industry where production and exports can increase significantly without needing to hire many people. The employment inducement coefficient for semiconductors is less than half the manufacturing sector average. In particular, the recent surge in semiconductor exports was driven to a significant degree by rising memory chip prices, rather than simply by a large increase in production volume. When prices rise, the effect on production expansion or new hiring is limited.

Yonhap News Agency

In fact, the number of people employed in manufacturing decreased by 62,000 in the first half of the year. While both manufacturing output and business sentiment improved, increased production focused on semiconductors did not translate into broader hiring across the manufacturing sector. In contrast, domestic demand and non-semiconductor industries—which traditionally create more jobs—remained weak. The Korea Labor Institute pointed out that growth in the domestic demand and non-semiconductor sectors, which account for most employment, stayed near 1 percent. This means that even if the overall economic growth rate rises to around 3 percent, it is difficult to see a significant increase in employment unless consumption, services, and non-semiconductor manufacturing—directly linked to job creation—improve.

This polarization was also seen within the service sector. While the number of service sector jobs increased by 300,000 in the first half, 242,000 of these were concentrated in the health and social welfare services. By contrast, the number of jobs in professional, scientific, and technical services fell by 88,000, and employment also declined in areas closely linked to domestic demand, such as wholesale and retail, accommodation, and food services.

Difficulties for younger people entering the labor market have also contributed independently to the slowdown in hiring. The employment rate for people in their 20s dropped by 1.3 percentage points from a year earlier, the sharpest decline among all age groups. The number of young people employed has decreased for 44 consecutive months, and their employment rate has dropped for 26 straight months. In particular, the number of newly hired young workers with a tenure of three months or less decreased sharply. This indicates that, beyond existing jobs being lost due to economic weakness, companies are reducing new hires, hitting young newcomers entering the labor market especially hard. Even among those in their 20s with associate or bachelor’s degrees or higher, while employment rates were maintained, the number of new hires dropped.

The instability of regular employment, normally the core of the job market, also poses a problem. The increase in the number of regular workers in the first half of the year was just one-third of last year's figure, and for the first time since December 1999, the number declined in May. Instead, the number of non-wage workers, including the self-employed, began to increase and accounted for two-thirds of the total increase in employment. This means a significant proportion of new jobs created did not translate into stable, wage-earning positions. The Korea Labor Institute concluded, "It is not that employment has become insensitive to growth, but rather that growth linked to employment has been weak."

This content was produced with the assistance of AI translation services.