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Despite a determined response, COVID-19 has severely affected the South Korean economy.
One of the first protagonists in the fight against the coronavirus was South Korea. The densely populated peninsula, located a short walk from the Chinese shopping malls of Shanghai and Qingdao, was destroyed early. In mid-February, South Korea was the country with the highest number of new infections after China. Since then, their numbers have dwindled to a few dozen, but outbreaks of the disease have resurfaced across the country, in regulatory blind spots such as devout congregations, physical dance classes, nightclubs and a logistics warehouse. South Korea remains on the brink of a new national outbreak.
Despite a determined government reaction, which added a comprehensive border quarantine system, competitive infection control and a 270 trillion won (US$228 billion) fiscal stimulus package, COVID-19 has wreaked havoc on the South Korean economy and in the still underdeveloped hard labor market. below. The outbreak closed South Korea’s borders and scared shoppers off the streets, stores and entertainment venues. Businesses closed their doors voluntarily, as a precaution and in reaction to canceled orders and declining sales. Exports fell almost a quarter year-on-year in April and almost part in May, highlighting South Korea’s heavy dependence on foreign industry and its exposure to opportunities in its main trading partners, China and the United States.
As an indicator of customer confidence and the overall state of South Korea’s manufacturing sector, Samsung recorded a 23% drop in smartphone sales in the first quarter, followed by a further contraction in the second quarter. But the service sector has been greatly affected. Service providers’ revenues remain around 50% of their pre-January levels. In high-tech services, such as Seoul’s infamous plastic surgery sector, 95. 1% of providers say they have been affected and their revenue has fallen by 30% or more. Employers responded by suspending or laying off workers.
This represents a major challenge for staff in a context of exhausting employment opportunities, particularly as the country’s markets remain highly fragmented between the commercial and service sectors and institutions of other sizes. When an economic sector suffers large layoffs, those laid off find it difficult to find open positions that suit them.
South Korea’s hard work market as a whole has been bleeding since January. In March alone, 1. 6 million employees were forced to take temporary leave following business closures. In April, 467,000 employees lost their jobs. The headline unemployment rate, a conservative measure of unemployment, hit 4. 2% in April and 4. 5% in May. These figures further mask a significant increase in informality among those who have managed to keep their jobs: workers who involuntarily move to transient or seasonal jobs, or reduce their hours to less than full-time.
Adding underemployed staff to the number of unemployed, an estimated 830,000 employees moved into less secure jobs or unemployment in April, leading to an unemployment rate of 14. 9% (4. 42 million out of 29. 68 million adults). It is highly unlikely to estimate the additional number of civil servants who have been marginalized to less privileged positions (although they still have a full-time contract) and those who have benefited from salary discounts or freezes. Anecdotal evidence suggests it may simply be in the millions.
Job demands are even more severe among recent graduates and those who lack good enough experience and skills. Even before COVID-19, those employees were largely confined to transient and abnormal positions. In the context of COVID-19, as all job opportunities dried up and businesses struggled to accommodate their regular contract workers, the number of temporary workers dropped sharply, to nearly half a million in May (compared to 7. 5 million in 2019). 9. 3 percent of young workers are now officially unemployed. , and 17. 3 percent are in precarious jobs, probably dreaming of a bigger job. Regional Employment and Social Protection Plus centres were flooded with queues of job seekers.
The impacts differ between genders. The overall male unemployment rate has increased significantly as men struggle to find select jobs under the Korean male breadwinner social model, while the female unemployment rate has decreased as laid-off women are dissuaded from the hard labor market. . It is vital to note that unemployment figures only take into account those who have not yet applied to find a job, not those who have abandoned their search.
A prolonged interruption of service will inevitably lead to an increase in youth and female unemployment. Given the existing structural barriers to access to decent jobs, young people and women will face difficult situations to re-enter the labour market. Lately, there is no education, which further deprives them of opportunities to be informed and acquire key skills. -fill) jobs. This highlights the divergence of economic fortunes – even polarization at those critical times – within South Korean society.
Unequal opportunities
The effects of the pandemic have been felt unevenly by other types of employers and staff. The greatest losses have been suffered by historically vulnerable groups, including small and medium-sized businesses (SMEs) that provide services to consumers and businesses, as well as transitory and abnormal situations. Staff lacked sufficient skills or integration into social networks to allow them to keep their jobs. The productivity of those investors and staff was harmed, even under pre-existing market norms, and they were easily laid off as a result of the economic crisis. .
The revelation of the economic impacts has thus further highlighted the structural flaws and vulnerabilities that weighed on some businesses and workers even before COVID-19, and had led to a state of dualism between economic sectors, called number one and secondary markets.
The number one market is made up of conglomerates of companies (chaebol) and their subsidiaries, active in the productive and commercial sector. These corporations have been protected from the effects of COVID-19 thanks to their liquidity and cross-holdings, as well as their long-term contracts and relationships with the government, which in some cases amount to mind-boggling bailouts.
The secondary market is populated by SMEs and a small circle of family traders, basically chaebol service providers and subcontractors. SMEs, which are ultra-competitive and compete for a price greater than the uniqueness of the product, cannot finance innovation or transformation in the face of changes in the market. This leaves them at the mercy of the business cycle.
Resource-based businesses operate under the direct supervision of regulation and employ workers with the most productive degrees, backgrounds, and alma mater, subject to contracts that provide comprehensive protections and benefits. Their employees survived the typhoon unscathed, certain that they had a task to stay or restore. Workers in the secondary sector, on the other hand, found themselves without tasks and without task clients for the coming months.
This state of market dualism is maintained through inconsistent and unevenly enforced regulations, insufficient and unequal social ions, and rigid criteria of employer-worker and chaebol-subcontractor interaction in the South Korean economy. Such norms are rooted in Confucian culture as well as structural realities. . Specifically, the government is doing little to hold marketers accountable, or to publicize the integration of non-traditional staff. Despite measures that appear to favour SMEs, the government remains heavily reliant on repeated large-scale purchases of flagship chaebols and chaebols. They remain the country’s goodwill ambassadors to the rest of the world. The government also imposes restrictive regulations on service providers, adding banking, consulting, and legal services. The lack of employment for abnormal staff and the weakness of anti-discrimination provisions and their enforcement perpetuate the precarious lifestyles of secondary sector staff.
Call for smarter political targeting
The severity of the economic scenario in parts of South Korea’s economy demands a significant government reaction to alleviate suffering, keep economic sectors running, and provide the necessary impetus for recovery. On the other hand, the backlash won’t have to come in the moment at the expense of the country’s fiscal solvency, nor do they deserve to be a burden on generations of taxpayers and borrowers in the long run. The government also deserves to take advantage of the slowdown to address structural problems, at a time when reforms are less disruptive and can be more disruptive. Therefore, a prudent reaction deserves to complement broad crisis mitigation measures with targeted fiscal injections channeled to express socio-economic teams and structural reforms for market integration and equalization.
The South Korean government’s emerging policy has some elements of this framework, but further rebalancing and some explicit legislative interventions would be warranted. To the extent that South Korea’s reaction serves as a style for other affected countries around the world, it is useful to highlight its strengths and weaknesses.
The South Korean government has responded to the COVID-19 outbreak with a rigorous public fitness regimen, pushing testing, contact tracing, quarantine (and a civic lockdown) into high gear. The government also responded in a similarly temporary way to the economic strains caused by the lockdown. The Bank of Korea has reduced its interest rates twice, to 0. 5%, the lowest rate since the disastrous currency crisis of 1998, to prevent bankruptcies and promote liquidity and investment. A fiscal stimulus package of 270 trillion won (14% of GDP) was implemented in stages to ostensibly help low-income and middle-income families fulfill their fundamental desires and fill the gap in income sources of merchants and local SMEs. The fiscal stimulus included a voucher formula of 400,000 to 1 million won ($360 to $900) per family based on family length and annual income source, distributed to about two-thirds of all families. The vouchers – actually prepaid cards, gift vouchers and even deposits on individual credit and debit cards – had a limited validity in terms of time and place, in order to maximize their propensity to have an effect on local markets. .
This large-scale monetary injection was made possible by the South Korean government’s ability to use its fiscal area as needed and mobilize additional new funds. The targeting of specific economic sectors and the adaptation to the non-public payment tastes of the population has been made possible thanks to the remarkable degree of integration of institutional databases under government control and the suspension of the private rights of South Korean residents. Unfortunately, the scale and accuracy of the program’s targeting may not be fully replicable in other countries due to institutional limitations. .
At times, the bond formula has helped South Korea’s small investors and poor, middle-class families, but evidence suggests its target has been vague. On the beneficiaries’ side, the programme has been too broad and insufficiently progressive, making it costly and unnecessary. The voucher only serves to update the existing expenditures of middle-class households, while there is no guarantee that the vouchers will supplement the essential intake of the poor. In other words, the goal of reducing poverty by stimulating the acquisition of fundamental rights Essential products through deficient markets and revitalizing by encouraging the acquisition of locally produced products that are not essential through the medium of elegance has had limited success. Meanwhile, investment for the program has been difficult and the government is looking for artistic responses such as a “solidarity” tax on the super-rich, without provoking a political firestorm.
As for the origin of the economy, the program had some unforeseen beneficiaries, as merchants of imported and luxury goods (such as wine) reported an increase in demand. On the other hand, the program did not manage to save the closure of SMEs. There is little evidence that the fiscal stimulus has spurred job expansion or helped the neediest staff fill some of the new vacancies. Near-universal cash transfers are a half-hearted attempt to supplement the weak social security system.
So far, the South Korean government has also failed to adopt the economic reforms needed to achieve greater fluidity, transparency, and a healthy festival between businesses and staff. These reforms are long overdue, but there is no even thought of implementing them in the coming months. Staff compete for a small number of jobs in their narrow market segments and others are systematically ignored because they are not compatible with the sector, vital human resources are wasted and expansion is discouraged. Cash transfers have limited strength to counter this. The most effective way to revive economic expansion is to promote innovation and new investment from underutilized businesses and personnel. As a cornerstone of this effort, the government implements structural reforms to integrate and equalize the market.
Vladimir Hlasny is a professor in the Department of Economics at Ewha Women’s University in Seoul.
This article is an extension of a previous East Asia Forum article.
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One of the first protagonists in the fight against the coronavirus was South Korea. The densely populated peninsula, located just steps from the Chinese commercial centers of Shanghai and Qingdao, was destroyed early. In mid-February, South Korea was the country with the highest number of new infections after China. Their numbers have since dwindled to a few dozen, but outbreaks of the disease have resurfaced across the country, in regulatory blind spots such as worshipful congregations, fitness dance classes, nightclubs and a logistics warehouse. South Korea remains on the brink of a new national outbreak.
Despite a determined reaction from the government, which added a comprehensive border quarantine system, competitive infections, and a 270 trillion won ($228 billion) fiscal stimulus package, COVID-19 has wreaked havoc on South Korea’s economy and the market for hard work that is yet to be developed. calm down. The outbreak has closed South Korea’s borders and scared consumers away from the streets, retail and entertainment venues. Companies closed their doors on their own initiative, as a precautionary measure and as a reaction to cancelled orders and the exhaustion of overseas sales. Exports fell nearly a quarter year-on-year in April and nearly a portion in May, highlighting South Korea’s heavy reliance on foreign industry and its exposure to occasions at home. its main trading partners, China and the United States.
As an indicator of customer confidence and the overall state of South Korea’s productive sector, Samsung recorded a 23% drop in smartphone sales in the first quarter, followed by a further contraction in the second quarter. But the service sector has been hit hard. Service provider revenues remain at around 50% of their pre-January levels. In high-tech services, such as Seoul’s infamous plastic surgery sector, 95. 1% of providers say they have been affected and their revenue has dropped by 30% or more. Employers responded by furloughing or firing workers.
This represents a key challenge for staff in a context of exhausting employment opportunities, especially as the country’s markets remain highly fragmented between the commercial and service sectors and institutions of other sizes. When an economic sector suffers massive layoffs, other people who have been laid off find it difficult to find vacancies that suit them.
South Korea’s hard work market as a whole has been bleeding since January. In March alone, 1. 6 million employees were forced to take temporary leave as a result of business closures. In April, 467,000 employees lost their jobs. The headline unemployment rate, a conservative measure of unemployment, rose to 4. 2% in April and 4. 5% in May. These figures also mask a significant increase in informality among those who have managed to keep their jobs: staff who involuntarily switch to transient or seasonal jobs or reduce their hours to less than full-time.
Adding underemployed personnel to the number of unemployed, an estimated 830,000 employees moved into less secure jobs or unemployment in April, leading to an unemployment rate of 14. 9% (4. 42 million of 29. 68 million Adults). It is highly unlikely to estimate the additional number of staff who have been sidelined to less privileged positions (although still under contract, full-time) and who have benefited from pay relief or freezes. Anecdotal evidence suggests this may only be in the millions.
Job demands are even more serious among recent graduates and those who lack good enough experience and skills. Even before COVID-19, those employees were largely confined to transitional and abnormal positions. In the context of COVID-19, as all job opportunities dried up and companies struggled to accommodate their regular contract workers, the number of transient workers fell sharply, to almost half a million in May (compared to 7. 5 million in 2019). 9. 3 percent of young workers are now officially unemployed. , and 17. 3 percent are in precarious jobs, probably dreaming of a bigger job. Regional Employment and Social Protection Plus centers were inundated with queues of job seekers.
Affections differ according to the sexes. The overall male unemployment rate has increased significantly, as men struggle to find select jobs under the Korean male breadwinner social model, while the female unemployment rate has decreased, as laid-off women are deterred from the labor market. It is vital to note that the unemployment figures only take into account those who have not yet applied to find work, not those who have given up their search.
A prolonged interruption of service will inevitably lead to an increase in youth and female unemployment. Given the existing structural barriers to access to decent jobs, young people and women will face difficult situations to re-enter the labour market. Lately, there is no education, which further deprives them of opportunities to be informed and acquire key skills. -fill) jobs. This highlights the divergence of economic fortunes – even polarization at those critical times – within South Korean society.
Unequal opportunities
The effects of the pandemic have been felt unevenly across other types of employers and staff. The greatest losses have been suffered by historically vulnerable groups, in addition to the small and medium-sized enterprises (SMEs) they offer to consumers and businesses, as well as transience and abnormal situations. Staff lacked sufficient skills or social media integration to enable them to keep their jobs. The productivity of those investors and staff suffered, even under pre-existing market rules, and they were safely laid off as a result of the economic crisis. .
The revelation of the economic impacts has thus further highlighted the structural failures and vulnerabilities that weighed on some businesses and workers even before COVID-19, and had led to a state of dualism between economic sectors, called number one and secondary markets.
The number one market is made up of business conglomerates (chaebol) and their subsidiaries, active in the productive and commercial sector. These corporations have been protected from the effects of COVID-19 thanks to their liquidity and cross-holdings, as well as their long-term contracts and relationships with the government, which in some cases amount to eye-popping bailouts.
The secondary market is populated by SMEs and a small circle of family traders, basically chaebol service providers and subcontractors. SMEs, which are ultra-competitive and compete for a price greater than the uniqueness of the product, cannot finance innovation or transformation in the face of changes in the market. This leaves them at the mercy of the business cycle.
Resource-based businesses operate under the direct supervision of regulation and employ workers with the most productive degrees, backgrounds, and alma mater, subject to contracts that provide comprehensive protections and benefits. Their employees survived the typhoon unscathed, certain that they had a task to stay or restore. Workers in the secondary sector, on the other hand, found themselves without tasks and without task clients for the coming months.
This state of market dualism is maintained through inconsistent and unevenly enforced regulations, insufficient and unequal social ions, and rigid criteria of employer-worker and chaebol-subcontractor interaction in the South Korean economy. Such norms are rooted in Confucian culture as well as structural realities. . Specifically, the government is doing little to hold marketers accountable, or to publicize the integration of non-traditional staff. Despite measures that appear to favour SMEs, the government remains heavily reliant on repeated large-scale purchases of flagship chaebols and chaebols. They remain the country’s goodwill ambassadors to the rest of the world. The government also imposes restrictive regulations on service providers, adding banking, consulting, and legal services. The lack of employment for abnormal staff and the weakness of anti-discrimination provisions and their enforcement perpetuate the precarious lifestyles of secondary sector staff.
Call for smarter political targeting
The severity of the economic scenario in parts of South Korea’s economy demands a significant government reaction to alleviate suffering, keep economic sectors running, and provide the necessary impetus for recovery. On the other hand, the backlash won’t have to come in the moment at the expense of the country’s fiscal solvency, nor do they deserve to be a burden on generations of taxpayers and borrowers in the long run. The government also deserves to take advantage of the slowdown to address structural problems, at a time when reforms are less disruptive and can be more disruptive. Therefore, a prudent reaction deserves to complement broad crisis mitigation measures with targeted fiscal injections channeled to express socio-economic teams and structural reforms for market integration and equalization.
The South Korean government’s emerging policy has some elements of this framework, but further rebalancing and some express legislative interventions would be warranted. To the extent that South Korea’s reaction serves as a style for other affected countries around the world, it is useful to highlight its strengths and weaknesses.
The South Korean government has responded to the COVID-19 outbreak with a rigorous public fitness regimen, pushing testing, contact tracing, quarantine (and a civic lockdown) into high gear. The government also responded in a similarly temporary way to the economic strains caused by the lockdown. The Bank of Korea has reduced its interest rates twice, to 0. 5%, the lowest rate since the disastrous currency crisis of 1998, to prevent bankruptcies and promote liquidity and investment. A fiscal stimulus package of 270 trillion won (14% of GDP) was implemented in stages to ostensibly help low-income and middle-income families fulfill their fundamental desires and fill the gap in income sources of merchants and local SMEs. The fiscal stimulus included a voucher formula of 400,000 to 1 million won ($360 to $900) per family based on family length and annual income source, distributed to about two-thirds of all families. The vouchers – actually prepaid cards, gift vouchers and even deposits on individual credit and debit cards – had a limited validity in terms of time and place, in order to maximize their propensity to have an effect on local markets. .
This large-scale monetary injection was made possible by the South Korean government’s ability to use its fiscal area as needed and mobilize additional new funds. The targeting of specific economic sectors and the adaptation to the non-public paying tastes of the population has been made possible thanks to the remarkable degree of integration of institutional databases under government control and the suspension of the private rights of South Korean residents. Unfortunately, the scale and accuracy of the program’s targeting may not be fully replicable in other countries due to institutional limitations. .
At times, the bond formula has helped South Korea’s small investors and poor, middle-class families, but evidence suggests its target has been vague. On the beneficiaries’ side, the programme has been too broad and insufficiently progressive, making it costly and unnecessary. The voucher only serves to update the existing expenditures of middle-class households, while there is no guarantee that the vouchers will supplement the essential intake of the poor. In other words, the goal of reducing poverty by stimulating the acquisition of fundamental rights Essential products through deficient markets and revitalizing by encouraging the acquisition of locally produced products that are not essential through the medium of elegance has had limited success. Meanwhile, investment for the program has been difficult and the government is looking for artistic responses such as a “solidarity” tax on the super-rich, without provoking a political firestorm.
Economically, the program has had unforeseen beneficiaries, as traders of imported and luxury goods (such as wine) have reported an increase in demand. On the other hand, the program has not been able to prevent the closure of SMEs. There is little evidence that the fiscal stimulus has spurred job expansion or helped needy staff fill some of the new vacancies. Near-universal cash transfers are a half-hearted attempt to supplement the weak social coverage system.
So far, the South Korean government has also failed to adopt the economic reforms needed to achieve greater fluidity, transparency, and a healthy festival between businesses and staff. These reforms are long overdue, but there is no even thought of implementing them in the coming months. Staff compete for a small number of jobs in their narrow market segments and others are systematically ignored because they are not compatible with the sector, vital human resources are wasted and expansion is discouraged. Cash transfers have limited strength to counter this. The most effective way to revive economic expansion is to promote innovation and new investment from underutilized businesses and personnel. As a cornerstone of this effort, the government implements structural reforms to integrate and equalize the market.
Vladimir Hlasny is a professor in the Department of Economics at Ewha Women’s University in Seoul.
This article is an extension of a previous East Asia Forum article.
One of the first protagonists in the fight against the coronavirus was South Korea. The densely populated peninsula, located a short walk from the Chinese shopping malls of Shanghai and Qingdao, was destroyed early. In mid-February, South Korea was the country with the highest number of new infections after China. Since then, their numbers have dwindled to a few dozen, but outbreaks of the disease have resurfaced across the country, in regulatory blind spots such as devout congregations, physical dance classes, nightclubs and a logistics warehouse. South Korea remains on the brink of a new national outbreak.
Despite a determined reaction from the government, which added a comprehensive border quarantine system, competitive infection control, and a 270 trillion won ($228 billion) fiscal stimulus package, COVID-19 has wreaked havoc on South Korea’s economy and the still-underdeveloped hard-labor market. down. The outbreak closed South Korea’s borders and scared shoppers away from streets, shops and entertainment venues. Businesses closed their doors voluntarily, as a precautionary measure and in reaction to canceled orders and declining sales. Exports fell nearly a quarter year-on-year in April and almost part in May, highlighting South Korea’s heavy reliance on foreign industry and its exposure to occasions in its main trading partners, China and the United States.