Why Employment Has Yet to Fall

Historically, total employment in South Korea has continued to grow in the long run despite dips in the recessionary periods. From 1963 to 2018, the total number of employees has increased by 35,000 per year on average. However recent trends are casting doubt on continued growth. Job creation is one of the most important policy objectives and a primary concern for the government, as employment directly affects the income and the economic well-being of the individual households. Acknowledging the significance of employment, South Korean government aims to add 150,000 new jobs this year. And yet, there are growing concerns over the falling employment in the near future, as technical substitution of labor reduces demand for workers even as shifting demographics decrease the labor supply. The adoption of automation technologies and progress in ICT has provoked fears of job destruction as people feel threatened that their jobs are at stake. Cashier-less grocery stores and driverless cars suggest that labor is quickly becoming obsolete. Population aging is another challenge, and as the ratio of the elderly to working-age adults increases, a shrinking work force will inevitably lead to labor shortages. However, the impact of technological progress and a lower population on employment may not be as dire as the widespread concerns. I analyze the recent structural changes taking place in the labor market, and provide descriptive evidence that employment growth may slow down or stall but is unlikely to plummet over the next couple of decades. This paper observes that employment levels may not fall drastically in the near future, and examines the possible channels through which the negative effects of technological and demographic changes may be counterbalanced, stalling declines in employment. First, I look at the impact of technological progress on labor by highlighting the relationship between automation and the labor demand, and examining the pattern of job polarization and structural changes in labor markets across countries in comparison to South Korea. Second, I show that lower population growth does not necessarily imply lower employment by scrutinizing the recent growth in Japanese employment. It illustrates how changes in important labor market parameters such as labor force participation and employment rates across age and gender groups can differentially affect employment.