KDI Economic Outlook 2022-2nd Half Increase in the Number of Employed Persons: Assessment and Projection November 03, 2022
KDI Economic Outlook 2022-2nd Half
Increase in the Number of Employed Persons: Assessment and Projection
November 03, 2022
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Jiyeon Kim
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- Summary
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■ Unprecedented gains in the recent job market can be mainly attributable to the higher labor demand related to non-face-to-face services and the digital economy resulting from responses and adaptations to the pandemic crisis.
- The COVID-19 pandemic dealt a severe blow to employment in face-to-face services but expedited the transition into a non-face-to-face economy and the Fourth Industrial Revolution, creating jobs in the related sectors.
■ While the labor market will remain robust into 2023, the growth of the number of employed persons will decline sharply to 84,000 in 2023 from 791,000 in 2022 as shifting population structures cut down the employment number, and the base effect kicks in.
- The number of employed persons is likely to significantly narrow its gain in 2023 owing to the base effect. Still, the employment rate, which reflects the change in employment conditions, is expected to keep favorable contributions at about 102,000.
- However, structural changes in demographics, such as the share of the working-age population and age distribution, are expected to bring down the number of employed persons (-18,000) with more explicit negative impacts on labor supply.
- The percentage of the prime-age population (30~59) will continue to fall, and the share of the working-age population (15+) will shift to decrease. Accordingly, such a structural change in the population is expected to be the leading cause of the slowdown in the number of employed persons.
■ Since a fall in labor input risks a decline in Korea's economic growth, policy efforts are required to boost the labor supply.
- In parallel with enhancing the use of an underutilized workforce of women, young seniors, and foreigners, policy efforts should aim to raise the birth rate in the longer term.
- On top of expanding the quantity of labor supply, there should be a human capital development system that can improve labor productivity and promptly respond to rapidly changing labor demand.
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The recent economic recovery has been weakening, and the labor market is showing a good trend. Compared to past economic crises, the recent employment recovery is unusually strong. Let's find out why and what the number of employed people will be next year.
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[Author]
Jiyeon Kim, Fellow at KDI
Shortcut to the author's interview 2:51
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- | Script |
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The pace of economic recovery is losing momentum as domestic demand slows down.
However, the job market is moving in the opposite direction, with a significant increase in employment rates and a sharp decline in unemployment rates.
The current surge in employment recovery is unprecedented, even when compared to past Asian and global financial crises.
To understand the factors behind the changes in the number of employed persons, we analyzed the situation from two angles: demographic changes and changes in employment conditions.
We categorized demographic changes into two types. The first is changes in the working-age population, including individuals aged 15 and older, as well as foreigners. The second is changes in the population structure, which represents the shift in the proportion of the prime working-age population whose employment rate tends to be relatively higher than other age groups.
Changes in employment conditions reflect the shifts in economic conditions and industry demand.
As of September this year, there was an average increase of 890,000 employed people, with 850,000 of them attributed to improvements in employment conditions.
As the economy shifts towards non-face-to-face interactions, the transport and warehousing sectors are experiencing growth, while the acceleration of digitalization is increasing demand for IT-related jobs.
The service sector for public health and welfare has also seen job growth due to the increasing demand for infection prevention and care services in the fight against the spread of the virus.
In other words, the response and adaptation to the pandemic have led to an increase in related jobs, which in turn has contributed to the recent growth in employment.
The increase in the working-age population resulted in 120,000 more employed persons, but the decrease in the proportion of prime working-age population led to a decline of 80,000 employed persons.
The proportion of elderly individuals who have low participation in economic activity has increased, while the proportion of the prime working-age group who are actively engaged in economic activity has decreased.
These demographic changes have led to a further decline in the number of employed persons.
So, based on these observations, what can we expect for the number of employed persons in 2023?
As the economy normalizes, foreign workers will increase and contribute to a rise in the working-age population. However, the decline in the proportion of the prime working-age population is expected to reduce the number of employed persons by 18,000.
Changes in employment conditions are expected to add 102,000 employed persons. This increase is smaller than 2022 due to the base effect, but the job market is anticipated to recover slightly faster than before the pandemic, as the face-to-face service industry is gaining strength in employment recovery.
In summary, the increase in the number of employed persons is expected to be 84,000 in 2023, significantly lower than in 2022. However, considering that the increase is largely due to the base effect and changes in population structure, it still suggests that the employment situation is expected to continue to improve steadily.
[Interview]
Jiyeon Kim, Fellow at KDI
The rapid aging of the population is leading to a decline in the prime working-age population. As a result, the change in population structure from 2023 onwards is expected to contribute to a reduction in the number of employed persons.
The decline in labor input could have a negative impact on the growth of the Korean economy. Therefore, policymakers must focus on efforts to increase the labor supply.
For example, increasing the utilization of underutilized human resources such as women, young and elderly individuals, and foreigners, as well as implementing long-term strategies to raise the birth rate.
In addition, it is crucial to establish a human resource development system that can enhance labor productivity and respond promptly to labor demand shifts, complementing quantitative improvements in labor supply.
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