Introduction

The Roh government announced a statement at the end of 2003 that “Job Creation will hereafter be the most important task.” Afterwards, the Tripartite Committee agreed on the 'Social Contract for Job Creation' and the government announced an 'All-out Plan for Job Creation' in February 2004 and the Committee for Job Creation under the charge of the Prime Minister got underway in March 2004. At the present time, as of December 2004, confirmed plans for job creation are being executed while new plans are being readied for launch.

However, one can ask why a policy of job creation is so important at this time, with an unemployment rate at about 3.4% in the last three years and a natural rate of unemployment also estimated at about 3.4%.

The purpose of this paper is to make a summarized report of the importance of the current job creation policy and the outline of the government's job creation plans and their evaluation.

Synopsis

The importance of a job creation policy should be understood in regards to the employment rate and income distribution.
First, the employment rate (the number of employed/the population between 15 and 64) in Korea was 63.7% in 1997 before the economic crisis, 59.2% in 1998 and 60.0% in 2003. This rate is low compared to that of 71.2% for the US 68.2% for Japan, and 72.2% for the U.K..  

The major cause of decreasing employment following the economic crisis in Korea was analyzed and can be attributed to an increase in the non-economic activating population, since getting a job has been more difficult after the crisis. The unemployment rate in Korea therefore has a propensity of being gradually under-evaluated because of the increasing number of unemployed.

Second, in relation to the aspect of deterioration of income distribution, the level of income inequality and the poverty ratio have rapidly increased following the economic crisis. Before the crisis, income inequality in Korea was estimated at about the middle compared to that of OECD countries. However, after the crisis, the estimated of level of income inequality was considerably higher. The absolute poverty rate had doubled to 11.5% in 2000 from 5.9% in 1996, and the relative poverty rate also doubled from 5.9 in 1996 to 11.5% in 2000. Therefore, the level of poverty in Korea is also considered high compared to levels in OECD countries.

One of the main causes for the deterioration in the income distribution structure in Korea following the crisis was because of an increase in the unemployed. The reason why income inequality and the poverty rate have not decreased despite a reduction in unemployment is that the main parts of the increased unemployed were converted to a non-economic activating population instead of being employed.   

Therefore, job creation is a very important issue at this time since it is a starting point to improve the income distribution structure and increase the employment rate.

Conclusion

The basic focus of the government's job creation policies should be to provide a better environment for firms to do business since the main source of job creation is from firms, and to both support and enhance such a strategy one that enables growth which will create employment, which will in turn, help in fuelling additional growth. However, strategies on how to better provide a better environment for firms to do business are not clearly suggested.  

Furthermore, a plan is not merely to suggest a link by which an increase in employment will result in an increase in income and a reduction in poverty. This is because details are unclear on the extent of the problems being faced and the lack of a firm direction for improving the education and job training systems.. In addition, the plans require more consideration for the quality of employment in the service sector in which most job creation will occur.  

Finally, the plan should focus on a long term and comprehensive vision to help job creation in the civil sector by the government, as pointed out by the OECD in its jobs strategy recommendations below:  

ⓛ Set macroeconomic policy such that it will both encourage growth and, in conjunction with good structural policies, make it sustainable, i.e. non-inflationary.

② Enhance the creation and diffusion of technological know-how by improving frameworks for its development.

③ Increase flexibility of working -time(both short-term and lifetime) voluntarily sought by workers and employers.

④ Nurture an entrepreneurial climate by eliminating impediments to, and restrictions on, the creation and expansion of enterprises.

⑤ Making wage and labor costs more flexible by removing restrictions that prevent wages from reflecting local conditions and individual skill levels, in particular of younger workers.

⑥ Reform employment security that inhibit the expansion of employment in private sector.

⑦ Strengthen the emphasis on active labor market policies and reinforce their effectiveness.

⑧ Improve labor force skills and competences through wide-ranging changes in education and training systems.