SEOUL (REUTERS) - South Korea’s unemployment rate rose to an eight-year high in August as mandatory minimum wages rose, worsening economic policy frustrations for President Moon Jae-in whose approval rating is now at its lowest since inauguration.
The unemployment rate rose to 4.2 per cent in August from 3.8 per cent in July in seasonally adjusted terms as the number of unemployed rose by 134,000 people from a year earlier.
This was the labour market’s worst performance since January 2010, when the economy was still reeling from the global financial crisis, when 10,000 jobs were lost.
Finance Minister Kim Dong-yeon said on Wednesday (Sept 12) the government will need to adjust its wage policies, signalling some future soft-pedalling in the drive to raise minimum wages.
“(The government) will discuss slowing the speed of minimum wage hikes with the ruling party and the presidential office,” Kim Dong-yeon told a policy meeting in Seoul, adding he did not expect a short-term recovery in the job market.
Experts say the uproar over jobs could also cost Moon considerable political capital as he pursues closer ties with Pyongyang, as any good news from an inter-Korean summit may not be enough to offset public discontent over the lack of jobs and soaring housing prices.
More than 60 per cent of respondents in a Gallup Korea survey criticised Moon’s handling of the economy, including his ‘inability to improve the livelihoods of ordinary citizens’ and ‘minimum wage increases’.
The jobs report showed the labour-intensive retail and accommodation sector, which lost 202,000 jobs in August from a year earlier, was the hardest hit.
A total 105,000 jobs were lost from manufacturing industries, the report said.
However, the agriculture, construction and transport sectors saw a rise in the number of employed, partly offsetting the rise in the number of workers laid off.
The overall number of employed people rose by just 3,000 - also the worst since January 2010.
Each month’s worsening jobs report has sparked a strong public backlash, with President Moon Jae-in’s approval rating falling below 50 per cent for the first time on Sept 7.
A weekly Gallup Korea survey released last Friday showed Mr Moon’s support fell 4 percentage points to 49 per cent, the lowest since he took office in May 2017.
“At this rate, we may not see any gains in the number of employed in September or the month after that,” said Mr Oh Suk-tae, an economist at Societe Generale.
Mr Oh said economists at the Korea Development Institute, a state-run think tank, believed this year’s 16 per cent increase in the minimum wage – the biggest jump in nearly two decades - was discouraging employers from hiring.
“The president should be held responsible for this, nothing could change the trend unless the boss changes his mind about minimum wage hikes,” Mr Oh said.
The workforce participation rate declined slightly to 63.4 per cent from 63.6 per cent in July, as more jobs were lost than created, Statistics Korea data showed.