"No Jobs but Record High Employment?"... The Secret of Employment Rate Amid Recession [Song Seungseop's Financial Light]

Economic Growth Rate Hits Bottom but Record High Employment Rate?
Working 1 Hour a Week Still Counts as 'Employed'
Part-Time Workers Seeking Jobs Counted as Employed, Not Unemployed
Rising Employment Rate Due to More Housewives, Soldiers, and People on Break

A job information notice is posted on the job information board at an employment support center in Seoul. The photo is unrelated to the article content. Photo by Heo Younghan younghan@

Have you recently read articles saying that employment in our country is doing well? If so, you might have also seen headlines claiming that the employment rate is at an "all-time high." In fact, we are living in the easiest era in South Korea's history to find a job. Yet, the economy remains difficult. The growth rate keeps falling. Isn't that strange? The economy is getting tougher, but why does employment keep improving?

The Best Era to 'Find a Job'?

Last year, South Korea added 327,000 employed people. The employment rate for those aged 15 and older was 62.6%. This was the highest employment rate since the government began compiling employment statistics in 1963. The employment rate for the 15-64 age group, which is the OECD's comparison standard, was also at an all-time high of 69.2%. This year, that record is being broken again. Last month's employment rate was the highest for February on record. Moreover, employment rates and economic participation rates rose simultaneously across youth, middle-aged, and elderly groups.

For employment to improve this much, the economy usually has to be very strong. But our economy is losing momentum. According to the Bank of Korea, South Korea's economic growth rate last year was 1.4%, the sixth lowest ever. Except for major crises like the oil shock, the IMF crisis, or the global financial crisis, this is effectively the lowest. The outlook for this year is also bleak. In July last year, the government forecasted South Korea's 2024 economic growth at 2.4%, but in the January "2024 Economic Policy Direction," it lowered the projection by 0.2 percentage points.

Optical Illusion 1: The True Meaning of 'Employment'

If the economy is tough, companies usually find it hard to hire many people. So how did employment improve? To understand this, we need to know the true meaning of "employment." In statistics, an employed person is someone who worked at least one hour during the past week to earn money. This means that employed people are not only office workers who work from 9 a.m. to 6 p.m. Monday through Friday.

This is the first optical illusion. There is a gap between what people think "employment" means and what it means in statistics. We usually say "I got a job" when we find a stable position that can support our livelihood. We don't say "I got a job" just because we did a short part-time job. However, in statistics, if you work even just one hour a week, you are classified as employed.

The Statistics Korea does not manipulate data to make employment look better. The "one hour of work per week" rule is actually an international standard. The International Labour Organization (ILO) established this criterion. It may seem too broad, but there is a reasonable explanation. To measure a country's total production, you need to know the total labor input. To calculate accurately, you must understand how much labor was performed. If only full-time workers working five days a week were counted as employed, short-term workers would be excluded. It would also be impossible to know how much part-time or shift workers worked.

Optical Illusion 2: The Priority Rule

Now that you understand how employed people are counted, another question arises. Is a young person who works part-time while looking for a full-time job considered employed or unemployed? Statistics Korea clearly states that anyone who worked at least one hour a week is classified as employed. However, those who have submitted job applications or attended interviews are considered unemployed. So, this young person is both employed and unemployed.

This is the second optical illusion. People who fall into both categories are always classified as employed. This is due to the ILO's "priority rule," which requires that a worker's status be assigned to only one category. According to the rule, when conducting surveys, "employed persons are identified first," and then the unemployed are identified from the remaining people. For example, consider a young person in their twenties who works a night shift at a convenience store to earn pocket money while applying to large companies. We tend to think of this person as unemployed, but according to the priority rule, they are classified as employed.

Of course, this rule has been in place for a long time. It just did not cause illusions in the past because most employment was from regular full-time jobs working 9 to 6, and it was rare to find jobs where people worked only one hour a week. But times have changed. New platforms have emerged, and jobs that allow people to work and rest whenever they want have appeared. Delivery platform riders are a prime example. Riders decide their working hours freely and can quit anytime they want. As these short-term jobs increase, the gap between how we perceive employment and the statistics will inevitably widen.

Optical Illusion 3: The Decrease in the Economically Inactive Population

The last optical illusion arises from the calculation method. The employment rate is an indicator that shows how many people are employed, but it does not measure how many people in the entire population are working. It measures how many employed people there are among the "economically active population." The economically active population includes people aged 15 and older who are willing and able to provide labor to earn money. Those who do not fall into this category are excluded from the employment rate calculation. Typical groups excluded include homemakers, students, soldiers, elderly people unable to work, and those with physical or mental disabilities.

[Image source=Yonhap News]

We usually think that the employment rate rises because the number of employed people increases. However, the employment rate can also increase if the economically active population decreases. This is why some analyses say that the recent rise in employment rate is partly due to an increase in the number of people "taking a break." To be part of the economically active population, one must have the intention to work. If more people think "I don't want to work," the economically active population shrinks, and the employment rate rises. In fact, the number of people in their 30s and 40s who are simply resting has exceeded 600,000 for the first time ever, the highest since statistics began. This is why we cannot look at employment indicators as purely positive.

In summary, it is natural to feel that "there are no decent jobs to make a living" even though the employment rate is so high. Employment statistics are meant to measure how much labor is performed in our country, not to indicate that there are many high-paying, quality jobs. What people truly want is not just a high employment rate shown by numbers, but jobs that provide fair and sufficient compensation for the work done.

Editor's NoteEconomics and finance are difficult subjects because of complex terms and background stories. Financial Light delivers easy-to-understand economic and financial stories every week. Even without any prior knowledge, you can read smoothly and ignite your interest in economics and finance.