Crisis and Employment: The Case of Korea

Abstract

This paper examines Korea's employment dynamics and analyzes how adverse impacts could be mitigated during the recent economic crisis in comparison with the 1997 to 1998 Asian crisis. A clear lesson is that policies to mitigate adverse impacts of financial crisis on the macroeconomic level should be given priority for preserving employment. In this regard, expansionary monetary and fiscal policies to keep aggregate demand from collapsing need to be emphasized once a crisis breaks out. However, equally crucial is the maintenance of sound pre‐crisis fundamentals to help keep negative impacts from proliferating, even when a crisis is triggered. In addition, flexible labor market structures and temporary employment‐boosting policies appear to be necessary to reduce the negative impacts of a crisis on workers.