NABO Industry Trends and Issues (No. 25)
Published on 25 October 2018
Published by Industry & Employment Analysis Division of the Economic Analysis Bureau
I. Industry, Trade, Industrial Loans and Energy Market Trends
(Industry) Manufacturing production in August 2019 decreased in sectors such as computers and computer peripherals (-23.7%), home appliances (-19.3%) and automobiles (-11.9%), decreasing by –1.5%, MoM and –3.0%, YoY, monthly.
(Trade) In Korea, total exports in September 2019 decreased by –11.7%, YoY, monthly, while the exports of 11 major industries fell by –14.4%, including exports of semi-conductors (-31.6%) and petroleum (-18.4%).
(Industrial Loans) The volume of industrial loans in the second quarter of 2019 increased by 7.4%, YoY, due to increases in the services sector.
(Energy) International oil prices in the third quarter of 2019 saw a temporary spike incurred by terrorism, but still hovered around 60 dollars a barrel.
II. Impact of the Extension of Retirement Age and Peak-Wage System on Employment
The government has recently started to gather public opinion about the extension of the retirement age as a mid to long-term strategy against the decline in the working age population and total population. This calls for the need to evaluate the outcomes of existing retirement age extension initiatives in terms of employment, while also exploring desirable alternatives. An analysis using data from the Workplace Panel Survey (WPS) of the Korea Labor Institute concluded that when pursued in conjunction with the peak-wage system, an extension of the retirement age has a positive effect on the employment of seniors. Among businesses that have implemented retirement age extensions, those that have also introduced a peak-wage system employed 16.4% more workers aged 50 and over, compared to those without a peak-wage system. Businesses that have not introduced a peak-wage system but have extended workers’ retirement age employed 7.1% fewer young adults compared to those without an extended retirement age. Since the extension of the retirement age may lead to different employment effects by age group depending on the accompanying schemes, its effects should be thoroughly reviewed in future discussions.
III. Analysis of the Export Competitiveness of Korea’s Machinery Industry regarding the Fourth Industrial Revolution
The machinery industry has significant upstream and downstream impacts. Thus, the industry’s competitiveness is closely associated with productivity enhancement in the overall economy as well as increased added-value. While the Korean machinery industry has maintained a competitive advantage regarding exports from 2012 to 2018, its position is gradually weakening. The trade volume and trade surplus of the robot and the aircraft and drone industry – which are new industries within the machinery industry – have increased annually by 3.7% and 29.0% on average, respectively; while their Trade Specification Index (TSI) against the global market has improved from 0.16 to 0.17 and 0.08 to 0.48, respectively. An analysis of export competitiveness using the TSI revealed that while Korean robot exports fall behind those of Japan and Germany, they are catching up with Germany. In terms of the aircraft and drone industry, Korea has an overall export advantage over major countries. In terms of export and import unit prices, the technological competitiveness of the Korean robot industry falls behind that of Japan and the US while that of the Korean aircraft and drone industry falls behind that of Japan and Germany. Korea’s technological competitiveness in both industries against China has been weakening since 2015. In order to elevate the global competitiveness of Korea’s robot and drone industries, the government should seek out various ways to boost domestic demand and diversify areas of usage while implementing multifaceted measures such as encouraging promotions by institutions overseeing the development of the robot and drone industries.