in the wide wage gap between different educational levels. Up to now, the demand for the highly educated has been relatively strong, but the relative entry-level wages of college graduates have began to drop.
As the gap between the demand for and supply of college graduates has gradually narrowed, demand for new college graduates is reaching a saturation point and already many college graduates are finding themselves in temporary positions, which means that their employment prospects are deteriorating.
Employment in the tertiary industry has also rapidly increased, as has employment in the finance and insurance industry, which recorded the biggest increase from 2.4% in 1980 to 11.7% in 2004. During this period, the financial sector, including banking, insurance and securities, has grown substantially because the growth of manufacturing sector created demand for the supporting industries like finance.
Future job creation might mainly come from the tertiary sector, but Korea’s vocational education and training system is still organized to support manufacturing industry. Korea’s tertiary sector has not been successful in becoming internationally competitive because of undue regulations, a general disregard for the service industry and the lack of skilled labor in this sector. Nurturing competitive human resources in the tertiary sector is the most essential and urgent task to create jobs and secure a future growth engine for the Korean economy.
<Table 1-4> Employment Composition by Industry
(Unit: %)
Source: Korea National Statistical Office, Annual Report on the Economically Active Population Survey, various years.
Employment Structure by Status of Worker
The employment share of wage-earning workers has continually increased whereas that of non-wage-earning workers has dropped for the last 40 years.
It is true that, over the years of high economic growth, the market mechanism has found place in increased parts of the labor market and new
S.O.C & other services Year
Agriculture &
fisheries
Mining &
manufacturingManufacturing
Const.
Sales, hotels, restaurants
Finance, insurance,
business service
1963 63.0 8.7 7.9 28.3 2.5 - -
1970 50.4 14.3 13.2 35.3 2.9 - -
1980 34.0 22.5 21.6 43.5 6.2 19.2 2.4
1990 17.9 27.6 27.2 54.5 7.4 21.8 5.2
2000 10.6 20.4 20.3 69.0 7.5 27.2 10.0 2004 8.1 19.1 19.0 72.8 8.1 22.9 11.7
and more efficient production methods have been introduced. The result has been a shrinkage of the traditional sectors of employment that are composed of non-employees such as employers (hiring others), the self-employed (working for themselves), and unpaid family workers (family helpers) working no less than 18 hours a week.
According to <Table 1-5>, the employment share of non-wage-earning workers dropped from 68.4% in 1963 to 33.9% in 2004. Among these workers, the number of unpaid family workers rapidly dropped from 31.2%
in 1963 to 6.9% in 2004 as a result of structural changes in industry. As the economy has grown, the secondary and tertiary sectors have gradually absorbed a considerable number of unpaid family workers who were previously in the agricultural industry in semi-unemployed status.
Compared with OECD countries, Korea has a high share of the self- employed to total employment and a relatively low share of wage-earning workers. The correlation between GDP per capita and the employment share of the self-employed and unpaid workers is negative in most of the OECD countries. Given Korea’s economic development level, the share of the self-employed is excessively high and, as the economy advances, the ratio of wage-earning labor is likely to rise while that of non-wage-earning labor will fall.
<Table 1-5> Employment Composition by Status of Worker
(Unit: %) Wage workers Non-wage workers
Year
Regular Temporary Daily Employer Self-employed
Unpaid family workers
1963 18.8 12.7 37.2 31.2 1970 28.4 10.6 34.2 26.9
1980 37.7 9.5 4.7 29.3 18.8
1990 32.8 17.5 10.2 6.5 21.6 11.4
2000 30.2 21.8 11.1 6.9 20.8 9.1
2004 33.8 22.5 9.7 7.4 19.6 6.9
Source: Korea National Statistical Office, Annual Report on the Economically Active Population Survey, various years.
Employment Structure by Employment Type
Among wage-earning workers, the employment share of non-regular workers4 ), that is, those who are under temporary employment, has increased,and as for regular workers, that is, those in permanent jobs, there has been an overall reduction in terms of their share among wage-earning workers and in numbers. This has been the most lasting change in the Korean labor market in the aftermath of the financial crisis. The growth of non-regular workers is a common phenomenon observed in most of the OECD countries that comes with the increase in labor market flexibility.
The sharp increase in non-regular workers after the financial crisis may have resulted from the combined effect of two forces: one is that the labor market has become more flexible, since non-regular jobs have a shorter job duration and worker mobility among those jobs is higher; and the other is that general occupational degrading has happened, since non-regular workers hold lower-paid jobs compared to regular workers.
The share of non-regular workers to total employees increased from 45.7% in 1997 to 48.8% in 2004. Among wage-earning workers, the decline in the number of regular workers has been a relatively recent phenomenon that began in the mid-1990s. This decline has been most pronounced in relatively unskilled jobs such as clerks, laborers, operatives, and salespersons. Regular workers were substituted with temporary workers, and temporary workers were substituted with daily workers. Such a pattern indicates a shift in demand toward skilled labor.
It should be emphasized that although the increase in non-regular workers may be indicative of deterioration in the quality of employment, it contributed greatly to the post-crisis job creation and unemployment reduction. Legislation for the protection of non-regular workers should be prudently executed with the consideration that such legislation could reduce job opportunities for job seekers with weak vocational capability including the youth and unskilled workers.
4) Korea National Statistical Office classifies employment type into employees and non-employees, each of which is divided into three subgroups: Regular employees are those on labor contracts with indefinite contract length, temporary employees are those with contract length shorter than a year, and daily employees are those whose payment term or contract length is shorter than a month. Non-employees are composed of non-employees such as employers (hiring others), the self-employed (working for themselves), and unpaid family workers (family helpers) working no less than 18 hours a week.