NABO Industry Trends and Issues (No. 14)
I. Employment, Population and Industry Trends
(Employment) The number of employed people in October 2018 was 27.09 million, which is 64 thousand (0.2%) more than the same period of the previous year. The number of employed youths (15-29 years old) increased by 41 thousand (1.1%). While the employment rate dropped 0.2%p (YoY) to 61.2%, the unemployment rate increased by 0.3%p (YoY) to 3.5%.
(Population) As of September 2018, there are 2,321,820 foreign residents in Korea, having increased by 14 thousand (0.6%) from the previous month and by 72 thousand (4.5%) from the last day of December last year. The foreign resident population has increased annually by 8.1% on average from 1,576,034 in 2013 to 2,321,820 in September 2018, and the proportion of foreign residents among all residents increased from 3.1% in 2013 to 4.5% in 2018. As of the end of 2017, the foreign resident population (and proportion), in terms of type of residency, mostly consists of 415,121 (21.0%) expatriates, 279,127 (14.1%) non-professional workers, 238,880 (12.1%) visiting workers etc.
(Insurance) The insurance premium income from life and non-life insurances decreased whereas the premium from retirement pensions increased. As a result, the insurance premium income from life and non-life insurances in the second quarter of 2018 was 48.4 trillion won, which is the same as the previous year. In the second quarter of 2018, cumulative insurance premium income and claims paid out by indemnity medical insurance, amounted to 4.2 trillion and 4.3 trillion won, respectively, having increased from the previous year (by 17.3% and 14.6%).
Ⅱ. An Analysis of the German Reunification and Potential Implications
Since German Reunification occurred suddenly rather than after a period of advance preparation, the period of reunification is distinguished between the physical reunification (1989) and institutional integration (1990). This analysis was conducted based on what happened in 1990, from a legislative perspective, studying and drawing implications from the reunification process of Germany by analyzing the transformation of its fiscal and economic post-reunification conditions. The currency exchange that occurred after the German currency union incurred inflation and a wage increase in East Germany, causing recession from increased interest rates. Productivity in East Germany did not keep pace with the new, higher wages and thereby weakened job competitiveness, resulting in mass unemployment. After the reunification, the increased current net transfer expenditures spent on resolving social issues such as mass unemployment, caused the country’s debt ratio to reach 60% in 1999, weakening its national fiscal stability. The East German government explicitly stated that a “social market economy” should be the common foundation for economic consolidation, and stipulated that the right of the Deutsche Bundesbank to determine monetary and credit policies should also be enforceable in the East German currency region, while ensuring the introduction of the same social security system as that of West Germany, thereby promoting harmony.
Ⅲ. An Analysis of Korean Household Consumption Propensity by Age Group
Consumption is a crucial factor in the economy. The structural transformation of consumption has a significant impact on economic trends and production structure. Due to the recent decline of households’ propensity to consume, the currently limited level of private consumption is likely to persist. Therefore, this study aims to analyze the transformation of consumption structure by the age group of the heads of households as well as the transformation of the consumption structure of heads of households as they grow older, thereby drawing policy implications. Upon analysis of the National Survey of Tax and Benefit data, households in which the heads of households are in their 40s and 50s appear to have deteriorated spending power in other areas due to the burden of education expenses. Therefore, it appears that education policies that can ease the burden of costs related to education are necessary. Heads of households in their 60s show a sudden decline in propensity to spend due to a decline in income, while those in their 70s have low absolute income overall but relatively high propensity to spend. Considering that expenditure on leisure activities and pastimes are increasing among all age groups, Korea’s aging society is evolving in a way that places importance on balancing work and life. Therefore, consumption on items related to dining and travel is expected to increase further.