South Koreans are likely to have fewer weddings and babies this year than ever before, part of a demographic shift that risks hobbling the nation’s economy.
The number of marriages and births recorded during the first five months of 2016 hit the lowest levels for the same period in any year since the nation’s statistics office started compiling monthly data in 2000.
The figures underscore the challenge facing the government, which over the past decade has poured 80 trillion won ($72 billion) into efforts to reverse the falling birthrate. Prime Minister Hwang Kyo Ahn said this month that the country faces a crisis that threatens to limit long-term economic growth.
Many young South Koreans say they can’t afford to get married or have children. They cite housing costs as one of the biggest obstacles. Record-low interest rates meant to spur economic growth have fueled a property boom that has priced many of them out of the market. Meanwhile, the unemployment rate among those 15 to 29 years old is 9.2 percent—more than double the national average.
“Previous policies were focused on getting married women to have more babies, but a more fundamental problem could be that young people without jobs are finding it difficult to get married,” said Yoo Jin Sung, a Seoul-based research fellow at the Korea Economic Research Institute. “Youth unemployment is raising the age at which people get married and have their first babies, which can affect the total number of babies they plan to have.”
Women also say South Korea’s corporate culture makes life challenging for working mothers, leaving many reluctant to get married and have children.
Reversing the demographic tide is becoming more urgent. The country will pass two unwelcome milestones next year: its workforce will begin shrinking and people aged 65 and older will outnumber those 14 and below. Without successful government action, the economy’s potential growth rate will fall to 2 percent between 2026 and 2030, from about 2.7 percent now, the Hyundai Research Institute estimates.
The demographic decline is already entrenched: The number of women in their 20s and 30s is expected to fall to about 5.5 million by 2030, down from 7.3 million in 2010, according to the government’s statistics office.
India’s largest startups are starting to let people go
Job cuts point to belt-tightening as funding starts to fizzle
India’s largest online shopping service is heating up, and not in a good way. Flipkart’s regular Friday townhall grew tense after employees incensed by hundreds of job cuts openly accused management of betrayal. Taken aback, chairman Sachin Bansal countered that the departures stemmed from poor performance and he lost his job as chief executive for the same reason.
The co-founder admitted the company had missed financial targets in recent months, prompting an overhaul of its top rungs, according to employees who attended the meeting. He didn’t elaborate but recent moves -- including a brief decision to go mobile app-only after ditching its fashion site -- may have granted an opening to a hard-charging Amazon.com Inc.
Bansal’s unusual candor, which drew applause, underscores the plight of the country’s technology sector as competition intensifies and funding begins to dry up. Flipkart Online Services Pvt and Ola -- two of India’s largest startups -- have jettisoned staff and tightened their belts to sustain a bruising battle with Amazon and Uber Technologies Inc. Following in Flipkart’s footsteps, ANI Technologies PVT’s Ola has shuttered smaller brand TaxiForSure, acquired over a year ago for $200 million, and let go of staff. It’s offered severance benefits and “outplacement” to those discharged, the company said without specifying numbers.
“Call it by whatever name, Flipkart, Ola and several smaller startups like Snapdeal and Zomato are cleaning up their operations to cut costs,” said Satish Meena, an analyst at Forrester Research Inc,’s e-commerce and consumer devices practice. “There will be further job reductions as they encounter an increasingly tight funding scenario and no clear funding picture in the coming quarters.”
As Flipkart and Ola contract, Amazon and Uber are expanding. Amazon said in May its Indian headcount grew 40 percent last year and it would continue to “hire aggressively” to scale up. It’s also spending lavishly on advertising and marketing. Uber, which has brought several top-level Indian executives into the fold recently, said hiring is “picking up pace” to support its growing operations.
Fundraising and deals in India’s thriving technology ecosystem hit records in 2014 and 2015, fuelled by the promise of a fast-expanding internet and smartphone population. Nearly $8.9 billion of venture capital flowed into startups via 965 deals last year, according to data provided by London-based research firm Preqin.
Certain segments remain attractive. Hike Messenger became India’s newest internetunicorn after securing a round of funding at a valuation of almost $1.4 billion from investors including Tencent Holdings Ltd. But Preqin’s numbers show the pace of funding is faltering, as investors grow wary of valuations and begin to focus on profitability. In the first two quarters of 2016, only $3.3 billion flowed into startups through 644 deals, it said.
Flipkart has seen multiple executive exits in past months, including that of its chief people officer and its chief product officer Punit Soni, a former Google executive from Silicon Valley. Bansal himself was replaced by younger co-founder Binny Bansal (no relation) in January. The company’s also put off recruiting from the Indian Institute of Management in Ahmedabad, a branch of the prestigious management school that’s long been a favorite wellspring of talent.
“For many startups, growth is flattening and investors too are asking them to face up to the new realities,” Meena said.
Researcher puts underemployment at 5% and 10% at zombie firms
State-run coal and steel companies keep idle workers in limbo
Cracks are starting to show in China’s labor market as struggling industrial firms leave millions of workers in flux.
While official jobless numbers haven’t budged, the underemployment rate has jumped to more than 5 percent from near zero in 2010, according to Bai Peiwei, an economics professor at Xiamen University. Bai estimates the rate may be 10 percent in industries with excess capacity, such as unprofitable steel mills and coal mines that have slashed pay, reduced shifts and required unpaid leave.
Many state-owned firms battling overcapacity favor putting workers in a holding pattern to avoid mass layoffs that risk fueling social unrest. While that helps airbrush the appearance of duress, it also slows the shift of workers to services jobs, where labor demand remains more solid in China’s shifting economy.
“Underemployment in overcapacity industries is a drag on the potential improvement of productivity in China, which will lead to a softening wage trend,” said Grace Ng, a senior China economist at JPMorgan Chase & Co. in Hong Kong. “It would exert pressure on private consumption demand and in turn affect the overall rebalancing of the economy."
Underemployment Tripled
Other projections indicate the employment situation is even worse. An indicator of unemployment and underemployment produced by London-based research firm Fathom Consulting has more than tripled since 2012 to 13.2 percent.
The official jobless rate isn’t much help for economists: it’s been virtually unchanged at about 4.1 percent since 2010 even as the economy slowed. The gauge only counts those who register for unemployment benefits in their home towns, which doesn’t take into account 277 million migrant workers. Total employment is 775 million, National Bureau of Statistics data show.
The NBS also compiles a newer survey-based jobless rate for big cities, which has been holding steady at about 5 percent, but that index isn’t updated on a regular basis. There’s no official underemployment rate.
With the newly-added labor force now in decline as the population ages, workers should become more scarce during the boom of the labor-intensive services sector. That suggests economic slowdown is the main culprit of labor under-utilization, said Fielding Chen, an economist at Bloomberg Intelligence in Hong Kong.
Bai bases his estimate on average labor activity and worker productivity. From 2004 to 2008, underemployment was effectively near zero following rapid productivity gains from China’s 2001 admission to the World Trade Organization and state-owned industry reforms.
Global Rates
Bai’s rate is lower than numbers for other countries, which use varying methodologies. The U.S. rate known as U-6 is 9.7 percent, down from a record 17.1 in 2009. Australia’s underemployed ratio is 8.7 percent. Mexico’s underemployment rate is 7.68 percent.
Conflicting objectives complicate China labor market dynamics. Even as President Xi Jinping and other top leaders pledge to reduce overcapacity, other official policies prevent widespread firings, in turn letting unprofitable "zombie companies" lock up broad swaths of the labor force by keeping them in limbo with shorter shifts and less pay.
In the heart of coal country, Shanxi Luan Mining Group Co. has said it put some workers on leave to alleviate pressure from downward prices and save money on wages. In Liaoning province, Angang Steel Co. has slashed some salaries by half as it aims to cut total pay by 10 percent this year and ordered early retirement for 3,600 workers, China Youth Daily reported in June.
“Underemployment is especially rampant at state-owned companies,” said Zeng Xiangquan, a professor of labor and human resources at Renmin University in Beijing. "The government tends to overprotect them." That keeps laid-off workers from getting retrained and hired into new jobs in more thriving sectors like services or high-end manufacturing, Zeng said.
Zombie Companies
Zombies make up about 7.5 percent of industrial businesses, which are mostly state-owned enterprises in the northeast rust belt and the less-developed western regions, the official Xinhua News Agency reported in July, citing Renmin economics professor Nie Huihua.
"There’s no quick fix," said Fathom economist Laura Eaton. "In the short term, to reduce the problem of underemployment in China, the government should allow those ‘zombie companies’ with low productivity growth and excess capacity to default or shut down."
If policy makers act swiftly, history shows it’s possible for them to tighten that unwanted slack back to where it used to be, said Bai, who has tracked China’s underemployment back to the beginning of the reform and opening up in 1978.
Bai’s research shows that underemployment peaked in 1983, 1990 and 2002, but fell sharply after each episode. China began SOE overhauls and extended economic reforms from rural areas to cities in 1984, pushed further overhauls in 1992, and enjoyed an export-led lift off in the early 2000s after WTO entry.
More fiscal policy support for the economy and funding to help fired miners and steelworkers get new skills would be good steps toward a solution, JPMorgan’s Ng said.
If the other accompanying structural changes let the stronger services sector and healthier new industries tap idle productivity, Bai said, underemployment could decline once again.
