Unemployment in South Korea
South Korea is a country in East Asia neighbored by china to the west , Japan to the east and North Korea to the north. Its capital is Seoul. Unemployment refers to a situation whereby people are available and ready to work but there is no work for them. Unemployment rate is used to measure the prevalence of unemployment (Diamond , 2000). Causes of unemployment may include insufficient effective demand for a country’s goods and services , inefficiencies and structural problems in a country’s labor market, mismatch between the supply and demand of skills due to disruptive technologies and globalization, unionizations , minimum wage laws and high taxes which discourage hiring of workers. In south Korea, labor force is defined as the number of people who are unemployed but seeking work in addition to the number of people who are employed while the nonlabor force constitutes the people who are not seeking employment , those who are institutionalized and those employed in the military(Diamond , 2000). The unemployment rate in this country in may 2010 was 3.20%. unemployment statistics for the last three years are as shown below.
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010 4.80 4.40 3.80 3.70 3.20
2009 3.40 3.50 3.70 3.70 3.80 3.90 3.70 3.70 3.60 3.50 3.60 3.60
2008 3.10 3.10 3.10 3.10 3.10 3.10 3.10 3.20 3.20 3.20 3.30 3.40
2007 3.40 3.30 3.20 3.30 3.30 3.20 3.20 3.20 3.20 3.20 3.20 3.10
(Chung , 2010)
As indicated in the above table , the rate of unemployment hit a record high in the beginning of this year . This can be attributed to rising oil prices, high US interest rates and low demand for the country’s exports. According to South Korea’s National statistical office , the number of employed people fell to 22.41 million in July from 22.52 million in June this year. According to the federation of Korean industries , business conditions are likely to worsen in the coming months and this is likely to cause higher unemployment rates. The number of jobless people increased by 586, 000 this year from last year(Chung , 2010) .
The high unemployment rate at the beginning of the year can be attributed to several factors. Energy should be abundant for a country to realize an economic growth(Chung , 2010). South Korea scores lowly here because her natural resources are quite limited. The country doesn’t have any oil or gas reserves yet its energy needs are quite high . This has forced the country to rely on imports of oil and natural gas hence the cost of production is quite high. This has led to the realization of minimal profits in the country’s industries leading to low capacity to absorb more workers hence a high unemployment rate (Chung , 2010).
Agriculture in this country has done quite poorly for many years due to a limited agricultural land. Poor farming methods which include use of hand and animal power by most farmers and lack of resources to adopt modern technologies has led to poor production hence this sector employs very few people. High wages and inflation can also be linked to rising unemployment rates at the beginning of the year (Chung , 2010). Excessive wage hikes , high administrative regulations on business activities , high financial costs , low social overhead capital investment have slowed down industrial competitiveness and entrepreneurship. This has led to decreased job creation rate hence high employment rate.
In the early 1990’s, Korea economic problems which have lingered to date were caused by wrong and out of date economic strategy . The economy stagnated for some time as the country embarked on a economic strategy overhaul. This wrong economic strategy has thus contributed highly to unemployment. Foreign investments have led to capital flight and economic dictation by foreign nations and this has posed problems for the south Korean economy which has in turn increased the rate of unemployment(Chung , 2010) . Many economists in south Korea attribute the economic crisis causing unemployment to a tight grip by the government on the Nation’s financial sector. Chaebol , a big company in the country has also been blamed for focusing more on sales growth , and blocking smaller companies from profitable markets instead of focusing on productivity and profitability and providing smaller companies with more money to do business and create jobs(Chung , 2010).
About 40 000 small companies have collapsed within the last three years and economists in that country forecast economic growth by the end of this year will dive to as low as 4.1% . All these problems are bound to compound the unemployment crisis (Chung , 2010). Failure to open up domestic market to foreign competition has also led to weak prices of Korea’s exports due to low quality leading to a poor performance of the economy. The Korean yen has lost value against the dollar as compared to the Japanese yen and this has resulted to a competitive pricing edge for Japanese exporters in the united states(Chung , 2010).
Political meddling in the nation’s financial sector whereby top executives in the bank industry are appointed by politicians , bureaucratic bottlenecks when it comes to issuance of large loans which have to be approved by finance ministry, and limits to foreign borrowing force large companies to spend a lot of time and money lobbying politicians and bank executives for scarce but costly loans (Chung , 2010) . Backward business regulations which include the requirement to have about 1000 official stamps and signatures for one to be allowed to build a factory have resulted to a slow rate of job creation hence high unemployment rate.