Employment Structure and Job Creation Strategy in Service Industries

Korea had one of the fastest growing economies in the world from the onset of industrialization in the early 1960s to the late 1990s. Korea’s economic development in those years had been based on industrialization that emphasized manufacturing rather than service industries. However, the tertiary industry (service sectors) has been steadily growing, and the importance of the service sector has been increasing in recent years. The services industry constitutes the largest sector of Korea’s economy in terms of production and employment. Korea’s service industry employed about 73.3% of the total workers in 2010 and accounted for 58.1% of the economy’s total value added in 2011. Our economy is now suffering from simultaneous decreases in the potential growth rate and job growth rate, expressed as 'jobless growth in manufacturing and job-rich depression in service industry'. The increases in employment are led by the knowledge-based service sectors while the overall productivity level of the service sector is low and its productivity growth has decelerated compared with other developed countries. The growth and development of the service industry may expand the service demand market and job-creating capacities. This may require institutional improvements to facilitate the productivity transmission mechanism in the economy. The purpose of this article is to provide an overview of the characteristics of the employment structure by decomposing the factors of the changes of industrial employment, based on the supply-demand balance equations of the Input-Output table. We also make policy suggestions to increase job creation and improve job stability in service industries of Korea