Although there are negative forecasts that Korea's economic growth rate will remain in the 0% range this year, employment indicators tell a different story. The number of employed people in May increased by nearly 250,000 compared to the same month last year, and the employment rate reached an all-time high. This situation does not align with the economic doctrine that "an increase in the workforce leads to economic growth." Analysis suggests that this occurred because the industries with increased employment are sectors with many low-wage jobs.
According to the 'May Employment Trends' announced by Statistics Korea on the 11th, the employment rate for people aged 15 to 64 last month was 70.5%. This is a 0.5 percentage point (p) increase from the same month last year. It marks the highest rate for May since the related statistics began to be compiled in January 1989.
The number of employed people aged 15 and over was 29.16 million, an increase of 245,000 compared to the same month last year. The increase in employment was the largest in 13 months since April 2024. The number of unemployed in May was tallied at 853,000, a decrease of 32,000.
The trend of increasing employment and decreasing unemployment is contrary to the economic situation where ultra-low growth is predicted. Growth rate and employment rate are closely interrelated. When employment increases, household labor income rises, which can be expected to boost domestic consumption. Increased consumption drives up corporate sales and injects vitality into the economy. Employment growth induces an upward economic cycle.
However, the current situation of the Korean economy is quite different from these positive prospects. The Bank of Korea, in its economic outlook for May announced on the 29th of last month, downgraded the growth forecast for the Korean economy this year from 1.5% (the previous forecast) to 0.8%. The Korea Development Institute (KDI) also halved Korea's growth forecast from 1.6% to 0.8%.
The International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD) both project Korea's growth rate to be around 1%.
The disparity between Korea's current employment indicators and economic growth rate can be explained by the economic contribution of each industry. Different industries contribute differently to growth, and employment without growth has increased as the number of employed in industries with low contribution has risen.
The fastest way to assess the economic contribution of industries is by wage level. Jang Juseong, Director at the Ministry of Economy and Finance, noted, "Low-wage jobs have a relatively lower industrial contribution compared to other industries."
Last month, the industry with the largest increase in employment was healthcare and social welfare services, with an increase of 233,000 people. The healthcare sector includes hospitals, clinics, and nursing hospitals, while the social welfare services sector includes care, protection facilities, and daycare centers.
The average wage in healthcare and social welfare services is 3.253 million won, which is only 78.7% of the overall industry average (4.136 million won). The interpretation is that the increase in employment was centered on relatively low-wage jobs, leading to a gap between employment indicators and growth rate.
On the other hand, the number of employed in manufacturing, where wages are relatively higher, has declined for 11 consecutive months. The average wage for workers in manufacturing is 4.678 million won, which is higher than the overall industry average. The number of employed in construction, which is directly linked to domestic demand, has also decreased for 13 consecutive months.
The entry of the baby boomer generation (born 1955–1963) into the senior age group is another factor explaining the disparity between economic growth rate and employment rate. There is an increase in senior workers, who have shorter working hours and lower hourly wages.
The population aged 60 and over increased by 505,000 compared to May of the previous year, and the number of employed in this group increased by 370,000. In contrast, employment declined for those in their 20s (-124,000), 50s (-68,000), and 40s (-39,000).
Director Jang explained, “Baby boomers have transitioned from their late 50s to their 60s,” and added, “As large groups of this population remain in the job market, the employment rate shows positive indicators.”