The Korea Development Institute (KDI) on Tuesday raised its forecast for Korea's economic growth this year to 2.5 percent. The figure is 0.6 percentage points higher than its projection issued just three months ago. The outlook from KDI, a state-run research institute, is relatively conservative. The Korea Institute of Finance raised its previous forecast of 2.1 percent to 2.8 percent. Global investment banks JPMorgan and Citibank projected that Korea's growth rate could reach 3 percent this year. As first-quarter growth jumped to 1.7 percent, the highest among 22 OECD countries on the back of semiconductor exports, expectations have spread that even the fallout from the Iran war will prove powerless against the semiconductor super cycle.
While the boom in the specific semiconductor industry is driving up economic indicators, a chill has swept through the labor market. That is why we cannot smile despite the sharply raised growth outlook. Statistics Korea announced Tuesday that the number of employed persons in April rose by 74,000 from a year earlier. It is the smallest increase in 16 months since December 2024, when the number of employed fell by 52,000. In particular, the fact that manufacturing employment has declined for 22 consecutive months warrants serious concern.
It has become clear that there are distinct limits to our economy creating jobs and broadening the foundation for economic recovery through the solo run of semiconductors alone. The sharp drop in jobs in professional, scientific and technical services, partly due to the spread of artificial intelligence (AI), is also worrisome. With quality jobs shrinking, young people are trapped in a harsh "employment ice age." The number of employed persons aged 15 to 29 fell by 194,000, extending the streak of declines to 42 consecutive months, the longest since the financial crisis.
The fruits of growth that rely on semiconductors, which have a low job-creation effect, are bound to be concentrated among workers in a small number of industries. If this fragile economic structure becomes entrenched, the shadows of "jobless growth" and "K-shaped polarization" could deepen further. Nor can the single wing of semiconductors guarantee sustained economic growth. For the Korean economy to maintain growth accompanied by the creation of quality jobs, the top priority is to restore a balanced industrial ecosystem and nurture new industries to succeed semiconductors. Easing the hiring burden on businesses and resolving manpower supply-demand mismatches through reforms that make the labor market more flexible and dismantle its dual structure is the bare minimum.
