Invest KOREA

The focus of the Korean economy is shifting from corporations and the manufacturing industry to small- and medium-sized enterprises (SMEs) and the service industry.

Employment circumstances are also showing signs of change. The ratio of employees who work for small- and medium-sized companies among the total economically active population is increasing as the Korean service industry grows.

As a part of the Park Geun-hye administration’s vision for a creative economy, the number of jobs at small- and medium-sized companies is expected to increase.

◇ Small- and Medium-Sized Service Companies Grow, Leading Higher Employment

Experts have analyzed that changes in the Korean industrial structure contributed to the increase in workers at SMEs.

As the Korean economy shifted from being manufacturing-oriented to service-oriented, the number of SMEs requiring human resources grew.

Between 2004 and 2012, the employment ratio of the Korean service industry rose from 64.7 percent to 69.3 percent. However, the employment ratio of the manufacturing industry dropped from 18.5 percent to 16.6 percent.

Yoo Gyeong-joon, a researcher at the Korea Development Institute (KDI) noted that the number of corporations that operate plants increases under a manufacturing-oriented economy, whereas the number of small businesses rises in a service-oriented economy. He added that changes in the industrial structure contributed to the growth in workers at SMEs.

Yoo also said that corporations tend to make subcontracts with SMEs for production and that SMEs also tend to split instead of growing the company to receive benefits, resulting in more SME employees.

However, an income gap between SMEs and corporations still exists.

The average income of workers at SMEs accounted for 57.6 percent of that for corporation workers in 2005, but the gap was narrowed to 52.6 percent in 2011.

◇ Korean Government Aims to Reach Employment Rate of 70 Percent

As the Korean government introduces policies to foster SMEs based on its vision for a creative economy, some forecast that SMEs will hire more workers.

The Korean government released a roadmap last June to achieve an employment rate of 70 percent by creating jobs, facilitating start-ups, reinforcing the capabilities of SMEs and advancing industrial structure.

The roadmap aims to shift the focus of employment policies on corporations and the manufacturing industry to SMEs, the service industry and venture companies.

The Korean government plans to create quality jobs in the service industry by facilitating industries that can create a large number of jobs and high-added value.

The government’s target is to increase the number of SMEs from 1,422 in 2011 to about 4,000 in 2017.

To create more jobs at SMEs, a revised commercial law released early this month gives tax exemptions for SMEs for additional employment.

When SMEs change holders of part-time jobs and dispatched employees to be regular workers, they can also receive a tax exemption of KRW 1 million per person. More tax benefits for part time jobs will be provided.

Active policies are also arousing expectations for the increase in number of jobs at SMEs and employment in the long term.

Sim Woo-il, a senior researcher at the Korea Small Business Institute, noted that Korea is better promoting active policies to improve the employment of younger generations compared to the United States and European countries, adding that the vision of a creative economy is not yet showing its effect, but that the employment growth at SMEs is promising.


Source Text

Source: Yonhap News (Aug. 26, 2013)

** This article was translated from the Korean.