South Korea’s unemployment rate hit an eight-year high in August as mandatory minimum wages rose, adding to economic policy frustrations and political challenges for President Moon Jae-in whose approval rating is now at its lowest since inauguration.
The unemployment rate rose to 4.2 percent in August from 3.8 percent in July in seasonally adjusted terms as the number of unemployed rose by 134,000 people from a year earlier.
This was the labor 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 the government will need to adjust its wage policies, signaling some future soft-pedaling 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 percent of respondents in a Gallup Korea survey criticized 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 labor-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 percent for the first time on Sept. 7.
A weekly Gallup Korea survey released on Friday showed Moon’s support fell 4 percentage points to 49 percent, 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 Oh Suk-tae, an economist at Societe Generale.
Oh said economists at the Korea Development Institute, a state-run think tank, believed this year’s 16 percent 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,” Oh said.
The workforce participation rate declined slightly to 63.4 percent from 63.6 percent in July, as more jobs were lost than created, Statistics Korea data showed.