Key Takeaways
- South Korea’s semiconductor exports are rising, but the domestic job market is stagnant due to “jobless growth” driven by automation.
- The government is pushing for the Services Act to enhance R&D in the services sector, which is vital for job creation.
- Excluding healthcare from the Services Act may facilitate its passage, which has been stalled for 15 years due to opposition from the medical community.
Employment Challenges Amid Export Success
While South Korea’s semiconductor exports set records, the domestic job market remains stagnant as automation transforms advanced manufacturing. This phenomenon, known as “jobless growth,” has prompted the government to focus on bolstering the services sector, which accounts for 70% of the nation’s employment.
On the 16th, the Ministry of Economy and Finance announced a research initiative titled “Study on Services R&D Policy Direction for Services Economy Revitalization.” With the prospect of passing the long-stalled Framework Act on Services Industry Development, the ministry aims to create an R&D strategy that can be implemented immediately after the bill’s passage.
The primary goal of this research is to move away from a manufacturing-centric support system. Currently, national R&D efforts largely prioritize traditional product development, hindering innovation in the services sector, particularly in consumer-driven industries like beauty and hospitality. A ministry official noted the necessity for a tailored approach to redefine services R&D.
Job Creation Potential of the Services Sector
The urgency for passing the Services Act is based on the services sector’s job creation capacity, which, as of 2023, contributes to 70.7% of total employment and 63.4% of the value added. While manufacturing job numbers are declining, employment within services subsectors like welfare and tourism remains stable. The employment inducement coefficient for the services sector is significantly higher than that of semiconductors, indicating its superior job creation potential.
Despite this, the services sector still struggles competitively, ranking low in productivity and R&D contributions among OECD countries. The Services Act, initially proposed in 2011, has faced considerable legislative hurdles, primarily due to healthcare sector concerns. The government has decided to exclude healthcare from the bill, which may improve its chances of passage.
Aiming for Broader Innovation
The government aims to expand the definition of services R&D, aligning it with digital transformation and AI advancements. This initiative will address new inter-ministerial industries, fostering collaboration across sectors to support convergence in areas like autonomous transport or the blending of entertainment and consumer products.
To facilitate this, the Ministry of Economy and Finance plans to re-evaluate the lifecycle of services R&D projects and develop a comprehensive roadmap for execution and management. There is a call from industry representatives for a framework act that integrates various service industries into a cohesive support system.
The government intends to accelerate preparatory efforts for the Services Act’s enactment, establishing mechanisms for improved financial support for intangible services, moving away from traditional collateral-based models. The enactment of this act is seen as crucial for stimulating the services sector and enhancing overall economic growth.
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