[Newsletter] South Korea's Total Population Decline

Greetings, a solid understanding of the direction the company is heading is crucial to making good HR decisions. Rightsizing—hiring and firing—and adjusting the mix of skills and capabilities of the workforce rely on a good understanding of the target market and the general direction that the market is moving. Now, more than any time in recent history, gaining that good understanding has become difficult.

There are just too many conflicting signals, making it difficult to know if we are coming out of an economic malaise or headed into a deeper one. The Hyundai Economic Research Institute (HRI) recently published a paper highlighting how this very problem is hitting Korea specifically. They called the paper "Five Mona Lisa Ambiguities and Implications for the Korean Economy." The title is in reference to the famous quality of the subject of Leonardo da Vinci's painting, in which we cannot decide if the model is smiling or not. Right now, we cannot decide if Korea's economy is smiling or not.

HRI gives the following explanation:

• "Confusion in economic direction" refers to the logical inconsistency of the coincident index and the leading index. It is difficult to logically analyze the economic prospects of Korea.
• "Gap in the export economy by sector" refers to a phenomenon in which the overall export economy continues to be in recession, but the decrease in semiconductor exports and exports to China increases the sense of recession.
• "Illusion of Inflation" refers to the fact that although the inflation rate has decreased, the price level itself is still high, so actual consumption does not improve significantly due to the shrinking purchasing power of households due to soaring prices.
• "Economic polarization by industry" refers to the fact that while the manufacturing industry has been in a slump for a long time, the service industry has shown satisfactory performance, and the polarization of the industrial economy is causing ambiguity in economic judgment.
• "Gap between psychological indicators and physical indicators" refers to a phenomenon in which the economic sentiment of households and businesses is improving, but there is no clear direction for actual consumption and investment.

This excellent explanation really highlights how economic fundamentals and indicators come home to roost: how we feel them in reality. Consumers and employees make decisions on how they feel about the state of their own economic realities.

HRI's report continues, "The reasons for the Mona Lisa ambiguity of the Korean economy are:

• The weakening of the economic fundamentals due to the covid shock.
• The action of the stationary auto-regressive wave force.
• The global decoupling.
• The absence of clear economic stimulus measures.
• Multiple simultaneous risks."

This is our first daily HR newsletter for South Korea. We aim to provide insights into the factors that influence HR decision-making in Korea from the perspectives of both companies and employees. By understanding both sides of the coin, we can better understand how decisions are made and how we should respond to emerging issues.

We will take a daily deep dive into all the issues, developments, news, government releases, and data of importance to HR.

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Article originally published in Steve's LinkedIn Newsletter HR Asia July 31, 2023