Think Tank Blames Gov't Initiatives for Soaring Unemployment

The minimum-wage hike, shorter working week and giving temporary workers permanent positions have triggered rising labor costs for businesses and pushed up unemployment, the state-run Korea Development Institute said in a report Monday.

This is the latest blow for the government's labor initiatives that were aimed at boosting employment and stimulating the economy. The government has blamed slowing population growth and manufacturing layoffs for soaring unemployment.

According to the KDI, unemployment rose only 0.23 percentage point from 3.42 percent in the first quarter of 2014 to 3.65 percent in the fourth quarter of 2017. But then it surged 0.38 percentage point over the first three quarters of this year to 4.03 percent as the minimum wage hike and shorter working week started to hit businesses.

The KDI said the biggest reason for the rise from 2014 to 2017 was a "mismatch" between available jobs and the aspirations of jobseekers, while the rising unemployment this year is due to a "decline in labor demand at businesses," meaning companies cut hiring.

Kim Ji-woon at the KDI cited as major reasons for the decline in labor demand "downsizing in the manufacturing and service industries," "a drastic cooling off of the construction industry" and "an overall increase in labor costs."

Kim said he does not agree with the government's claim that the drastic slowdown in new hires this year is due to a declining population. "The biggest reason is a decline in labor demand," he said.