This year, the contraction of employment in manufacturing has become pronounced. The proportion of manufacturing workers has hit a record low, and concerns about additional shocks are growing as U.S. tariff measures become more pronounced.
According to the Statistics Korea and the Ministry of Economy and Finance, the average number of manufacturing jobs from January to April this year was 4.395 million. The proportion of manufacturing jobs among all employed is 15.5%, the lowest level since the 10th Korean Standard Industrial Classification statistics were compiled in 2013.
On an annual basis, last year, the proportion dropped below 16% for the first time to 15.7%, and it has continued to decline every month this year. In January, it was 15.8%, 15.6% in February, 15.4% in March, and 15.2% in April, with April seeing a decrease of 124,000 compared to the same period last year, marking the largest drop since February 2019.
Last year, an improvement in manufacturing exports centered around semiconductors indicated a recovery in the economy, but it has not impacted the employment market. In fact, last year's manufacturing output increased by 4.4% compared to the previous year, and the Bank of Korea's statistics on gross domestic product (GDP) by economic activity showed growth in the manufacturing institutional sector for all four quarters.
However, industries with low employment generation coefficients, like semiconductors, are driving economic recovery while failing to increase jobs, sustaining a structure of 'imbalanced growth.' According to the Korea Development Institute (KDI), the employment generation coefficient for the semiconductor industry is 2.1, merely one-third of the average for the entire manufacturing sector, which is 6.2. In a situation where hiring capacity is diminishing, the reluctance of corporations to increase personnel amid domestic and external uncertainties is also cited as a reason for the employment stagnation.
In particular, the entry of the youth cohort into manufacturing is becoming increasingly difficult. The proportion of workers in their 20s among manufacturing employees from January to April is 10.6%, lower than the 60s cohort (13.2%), who have exceeded retirement age. This is the lowest figure since statistics began.
Amid U.S. trade pressures, concerns regarding the recovery of employment in manufacturing are deepening. In March, the U.S. imposed a 25% tariff on steel and aluminum and is expanding tariff targets to include automobiles, components, semiconductors, and pharmaceuticals. In April, they announced a 25% reciprocal tariff on Korean products. Currently, only a 10% basic tariff applies, but the actual increase is scheduled for July, which could hit the export-reliant Korean manufacturing sector hard.
The government is trying to delay the implementation of tariffs and negotiate withdrawals through 2+2 trade consultations. However, a decline in exports is already evident in the indicators. Exports in April increased by 3.7% compared to the previous year, but the average daily export volume, considering working days, decreased by 0.7%. Particularly, exports to the U.S. dropped by 6.8%. From May 1 to 10, exports decreased by 23.8%, and exports to the U.S. plummeted by 30.4%.
This trend is also affecting growth rates. The Bank of Korea recently announced that the real GDP growth rate for the first quarter was -0.2% compared to the previous quarter, which is 0.4 percentage points lower than the previous forecast. The manufacturing institutional sector, centered around chemicals and machinery, saw production decrease by 0.8%, dragging down the overall growth rate.
The Ministry of Economy and Finance has expressed concerns over the decline in manufacturing employment. Kim Beom-suk, acting Minister of the Ministry of Economy and Finance, noted after the employment trend announcement on the 14th, "The prolonged recovery of domestic demand and the double whammy of external uncertainties are expanding the stagnation of manufacturing employment."
The structurally poor employment situation in manufacturing continues into the medium to long term. The proportion of manufacturing workers has decreased from 17.0% in 2013 to 15.6% last year. During the same period, the health and social welfare service sector increased from 6.2% to 10.3%, and the transportation and warehousing sector grew from 5.6% to 6.0%. The sectors that have increased are primarily those with relatively low-paying, low-skilled jobs, such as public jobs and platform labor.
In fact, as of October 2023, the proportion of those earning over 4 million won per month in manufacturing is 37.3%, higher than transportation and warehousing (27.4%), public administration (29.9%), and welfare services (9.7%). The reduction of high-wage manufacturing jobs and the increase of relatively low-wage jobs indicate ongoing qualitative changes in the labor market.
Due to the 'tariff shock,' the government, the Bank of Korea, and major domestic and international institutions have consecutively revised down their growth forecasts for the Korean economy this year. The KDI adjusted its first-half forecast from 1.6% to 0.8%, and the International Monetary Fund (IMF) lowered its forecast for Korean growth rate to 1.0%. The Bank of Korea has also indicated that it may make further downward adjustments to reflect tariff risks.