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Retail, service sector creating more jobs

July 04,2017
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More jobs are now being created in the retail and services sector than in the past, when giant manufacturing companies hired the most.

Of the more than 450 workers at a Lotte Mart branch in Seoul that opened in April, 126 people were hired directly by Lotte Mart, 35 were hired through separate service companies and 300 work for brands that entered the store.

The figures show how many jobs can be created by establishing a single hypermarket.

“Normally 500 jobs are created when you open a single hypermarket,” said Lee Byung-hee, managing director for Lotte’s corporate innovation office. “For larger multiplex malls, thousands of more jobs can be created.”

Employment in the domestic market, traditionally led by manufacturing sectors, is now being led by conglomerates in the retail and service sector, according to data from Financial Supervisory Service and Fair Trade Commission.

Data shows recruitment by major manufacturers Samsung and LG has recently slowed while retail and service giants Lotte, Shinsegae and CJ rapidly expanded hiring.

From 2006 to 2011, Samsung expanded its workforce at a rapid rate. The number of employees at the company grew from 191,344 in 2006 to 258,507 in 2011, which means more than 67,000 were added during the course of five years.

LG added nearly 48,000 and SK slightly over 39,000 over five years. Hyundai Motor added over 24,000 employees. These conglomerates were major manufacturing companies focused on producing electronics, semiconductors and cars.

But during the latter five years of the decade, from 2011 through 2016, the job market has completely shifted.

The retail conglomerate Shinsegae added the most during the past five years by hiring more than 30,000 people. The ranking was followed by another major retailer, Lotte, which expanded its workforce by roughly 26,000 during that time.

A traditional manufacturing giant, Samsung, shed staffs from 2011 through 2016 - the total number of Samsung’s workforce from 2011 through 2016 declined by about 16,700 people.

A major reason could have been that it sold its chemical subsidiaries to Hanwha and Lotte in 2015.

Just looking at last year’s data, CJ added the most employees. CJ had 60,659 in 2015. That number increased to 65,076 last year.

“As the number of Olive Young shops increased from 552 to 800 in only a year, 4,000 new jobs were created,” said a CJ spokesperson.

Olive Young is CJ’s retail chain that sells health and beauty related products. After CJ, Shinsegae hired 3,569 and Lotte hired 3,555 people last year.

Considering the figures shown, industry insiders suggest that the Moon Jae-in administration should look to the nation’s retail and service sector to find answers to creating more jobs.

“The Moon administration vowed to create 810,000 new jobs in the public sector, but this is a short-term approach that fails to tackle the root of the problem,” said Lim Hyo-chang, a business professor at Seoul Women’s University. “Ultimately, more jobs should be created by fostering our service industries, and that also is a global trend.”

According to analysis by the Bank of Korea, the employment inducement coefficient for the service sector is 16.7 people, and for the manufacturing sector, it’s 8.8 people.

The coefficient, according to the bank, refers to the total number of people employed directly and indirectly to produce a billion won worth of a specific product or service. Twice as many jobs can be created in the service sector compared to manufacturing.

Still, the number of jobs offered from Korea’s service industries is small compared to other developed countries. According to figures from the OECD (Organization for Economic Co-operation and Development), earnings in the service industry account for 70 percent of countries’ gross domestic product on average.

But in Korea, the service sector accounts for less than 60 percent of its GDP.

Also, while the productivity of service industries compared to manufacturing is on average 90 percent for OECD members, it was only 45 percent for Korea. This means Korea’s service industry lacks productivity compared to other developed nations.

This is why industry insiders also point out that more jobs should be offered by higher-value adding service industries.

“The country needs to find out ways to expand the number of jobs in high-value adding service industries like finance, medical and energy,” said Lee Byung-tae, a business professor at Korea Advanced Institute of Science and Technology.


BY JANG JOO-YOUNG [kim.jeehee@joongang.co.kr]