🚨 Analysis of Construction Industry Employment Falling Below 2 Million and Household Income Decline
Today Korean Economic News | 2025.02.24
📌 Construction Industry Employment Falls Below 2 Million, Household Income Also Shows 'Record Decline'
💬 As the number of construction industry workers has fallen below 2 million, construction household income has decreased by the largest margin since related statistics began to be compiled. Youth employment slump is particularly noticeable, and the construction industry downturn is showing signs of becoming prolonged. Experts predict that construction industry recovery will be difficult for the time being due to high interest rates and a strong dollar trend.
1️⃣ Easy Understanding
The construction industry is in a serious recession. The number of people working at construction sites has significantly decreased, and the income of workers has declined by the largest margin ever. I'll explain the reasons and significance of this situation in simple terms.
Construction plays an important role in our economy. It's an industry that builds apartments, houses, roads, bridges, etc., and has provided jobs for many people. However, recently the number of people working at construction sites has fallen below 2 million. This is the lowest figure in the past 10 years.
The biggest reasons for this situation are 'high interest rates' and 'real estate market downturn.' As bank loan rates have increased, construction companies are feeling a heavy burden in borrowing money to start projects. Also, as real estate prices have fallen and transactions have decreased, it has become difficult to start new construction projects.
Household loan rates have also risen, making it difficult for ordinary people to get loans to buy homes. For example, while previously one might have paid about 1 million won in monthly interest on a 300 million won loan, now they have to pay over 1.5 million won. This has reduced real estate purchasing power, and consequently, demand for new apartments and houses has also decreased.
Construction workers' income has also taken a big hit. On average, construction household income decreased by about 15% from last year, which is the largest decrease since related statistics have been compiled. As jobs have decreased, workers' position in wage negotiations has weakened, and with less work available, real income has significantly fallen.
In particular, employment of young people in their 20s and 30s in the construction industry has plummeted. As younger generations avoid the construction industry, the aging of the industry is also intensifying. This could have a negative impact on technology transfer and productivity in the construction industry in the long term.
Experts predict that the current high interest rate situation and strong dollar trend will continue for the time being, making it difficult for the construction industry to recover in the short term. Without active policy support from the government and economic condition improvements such as interest rate cuts, the construction industry recession is likely to be prolonged. This is not just a problem for the construction industry but could have negative ripple effects on related industries and the entire economy, raising concerns.
2️⃣ Economic Terms
📕 Construction Industry
The construction industry designs and builds structures such as buildings, roads, and bridges, playing an important role in national infrastructure development and employment.
- It consists of various fields such as civil engineering, architecture, plant, and housing, and is an industry with large forward and backward linkage effects.
- It has the nature of a leading economic indicator, and construction industry trends provide important clues for predicting future economic flows.
📕 Household Income
Household income refers to the total revenue earned by household members through labor, business, property, and transfers.
- It is divided into regular income (earned income, business income, property income, transfer income) and irregular income.
- Changes in household income directly affect spending power and quality of life, and are indicators reflecting economic conditions.
📕 High Interest Rates
High interest rates refer to a state of high market interest rates, leading to increased borrowing costs and reduced investment.
- They are influenced by various factors such as central bank monetary policy, inflationary pressure, and economic growth rates.
- The construction industry and real estate market react sensitively to interest rates, and high interest rate conditions negatively affect business feasibility and purchasing power.
📕 Unemployment Rate
Unemployment rate is the percentage of people in the economically active population who cannot find jobs, an important indicator of economic conditions.
- Along with the overall unemployment rate, unemployment rates by age and industry are also important subjects of observation.
- While the decrease in construction industry workers has seasonal factors due to industry characteristics, continuous decrease suggests structural problems.
3️⃣ Principles and Economic Outlook
💡 Structural Causes and Mechanisms of Construction Industry Downturn
The phenomenon of construction industry workers falling below 2 million is the result of multiple structural factors beyond simple economic cycles.
First, the impact of high interest rates on the construction industry is significant. With market interest rates rising along with the Bank of Korea's base rate increases, construction companies' funding costs have greatly increased. Generally, construction projects have the characteristics of large initial investment sizes and long capital recovery periods, making them very sensitive to interest rate changes. Currently, mortgage loan rates are maintaining a level of 5-6%, and construction companies' project financing (PF) rates are at even higher levels. These high interest rate conditions are acting as factors that worsen construction companies' business feasibility and delay the commencement of new projects.
Second, the real estate market downturn is reducing construction demand. Housing price declines and transaction volume decreases directly reduce demand for new housing construction. Along with housing price adjustments that began in 2023, the increase in unsold housing has made construction companies more cautious about pursuing new projects. This leads to a decrease in the number of housing construction starts, which becomes a factor limiting construction job creation.
Third, the decrease in public infrastructure investment is also an important factor. With the strengthening of government fiscal soundness management, large-scale public construction projects are being reduced or delayed. In particular, the proportion of SOC (Social Overhead Capital) budget is continuously decreasing, which directly affects civil engineering field construction jobs. Public sector construction investment has played a role in offsetting private sector slumps during economic downturns, but currently, this buffer effect has weakened.
Fourth, the structural characteristics of the construction industry and labor market changes should also be considered. Construction has traditionally been a labor-intensive industry, but recent digitalization and automation trends are changing labor force demand. Also, as young people's avoidance of the construction industry becomes more pronounced, aging within the industry is intensifying. This is a structural problem that affects not only short-term job losses but also the long-term sustainability and competitiveness of the industry.
These factors are working together to create a serious situation of decreased construction industry workers and household income. In particular, since the construction industry has a large impact on related industries such as manufacturing and services, attention needs to be paid to the ripple effects of this downturn on the overall economy.
💡 Reality and Socioeconomic Impact of Construction Household Income Decline
The record decline in construction household income is having serious impacts on households and local economies dependent on the industry.
First, it's necessary to look at the concrete reality of construction household income decline. According to recent statistics, the monthly average income of construction industry households has decreased by about 15% compared to the previous year. This is more than six times the average income change rate for all industries (-2.3%), showing that the construction industry has been particularly severely hit. Income decrease is due to complex factors such as reduced working hours, decreased working days for daily workers, and slowed wage growth. Especially given the high proportion of daily workers in the construction industry, project decreases are factors that further worsen income instability.
Second, income decreases are leading to increased household debt burdens. The debt ratio of construction worker households is higher than the average for all households, and with income decreases and high interest rates overlapping, the burden of principal and interest repayments has greatly increased. This leads to deteriorating household financial soundness and reduced consumption, which can act as an additional factor for economic slowdown. In some regions, an increasing trend of personal rehabilitation and bankruptcy applications from construction workers is being observed.
Third, young people's departure from the construction industry is accelerating. The rate of employment decrease in the construction industry for young people in their 20s and 30s is the highest among all age groups. Along with income instability, relatively poor working conditions and limited career growth are pointed out as major causes. This departure of young people negatively affects the securing of skilled labor and technology transfer in the construction industry and acts as a factor accelerating the aging of the industry.
Fourth, the impact on local economies and social safety nets is also significant. Construction often accounts for an important part of specific local economies, so construction industry downturns also have chain effects on local commercial districts and service industries. Especially in small and medium-sized provincial cities, where large construction projects have a significant impact on the local economy, project decreases can lead to economic downturns for the entire region. Also, as households dependent on social safety nets due to job loss or income decrease grow, welfare demand is also increasing.
This construction household income decline has meaning beyond simple economic indicators. It is connected to various socioeconomic problems such as deterioration of the quality of life for workers in the industry, local economic downturns, and deepening social inequality. Also, consumption contraction due to income decreases could cause a vicious cycle that negatively affects the overall domestic economy.
💡 Construction Industry Outlook and Policy Response Measures
Let's look at the future outlook for the construction industry and policy measures to respond to it.
First, in the short term, construction industry recovery is not expected to be easy. Considering global economic uncertainty, continuing high interest rate environments, and the adjustment phase of the real estate market, it's difficult to expect a quick rebound in the construction industry. In particular, as long as the U.S. Federal Reserve's interest rate policy and strong dollar trend continue, domestic monetary policy autonomy will inevitably be limited, and high interest rate environments are likely to be maintained for the time being. In this situation, the number of construction industry workers and household income are expected to delay recovery for the time being.
Second, a mid to long-term policy direction is needed for the structural transformation of the construction industry. Policies are required to support the transition from traditional construction methods to new growth areas such as eco-friendly construction, smart construction, remodeling, and maintenance. This can increase the sustainability of the industry and provide opportunities for new job creation. Also, efforts should be made in parallel to increase productivity through digital transformation and technological innovation and to improve the labor-intensive structure.
Third, policy support for construction workers' job security and income guarantee is important. Strengthening the employment safety net considering the high proportion of daily workers in the construction industry, vocational training programs for skill enhancement, and financial support to respond to income volatility are needed. In particular, a comprehensive approach is required to promote the inflow of young people into the construction industry, including improving working environments, expanding career development opportunities, and improving social perception.
Fourth, it's also necessary to consider creating construction demand through strengthening the role of the public sector. It's important to maintain construction jobs by expanding public infrastructure investment during economic downturns and to pursue strategic projects that can contribute to strengthening national competitiveness in the long term. Improving aging infrastructure, green remodeling, and urban regeneration projects are areas that can create construction demand while increasing social value.
Fifth, a balanced policy approach is needed between real estate market stabilization and construction industry revitalization. Balanced policies are required that can suppress real estate speculation while increasing actual demand buyers' purchasing power and improving construction companies' business environment. In particular, it's necessary to seek construction revitalization measures focused on supplying reasonably priced housing for the middle class and the common people, improving aging housing, and expanding rental housing.
Through these various policy approaches, we should move in a direction that responds to the short-term construction industry downturn while enhancing the industry's competitiveness and sustainability in the long term. Since construction is an important industry that goes beyond a simple economic sector and is tied to national infrastructure, living environments, and many people's jobs and livelihoods, a systematic and comprehensive approach is even more important.
4️⃣ In Conclusion
The current situation where construction industry workers have fallen below 2 million and household income has decreased by the largest margin ever suggests structural problems beyond simple economic cycles. As complex factors such as high interest rate environments, real estate market downturns, and young people's departure from the industry work together, the possibility of a prolonged construction industry recession is increasing.
The reason this construction industry downturn is concerning is because of the large ripple effects the industry has on the overall economy. Construction is closely connected to various related industries from basic materials like cement and steel to furniture and home appliances, and is an industry with large job creation effects. Therefore, the continuous downturn of the construction industry could be a factor weakening the growth engine of the national economy as a whole.
In the short term, policy support for maintaining construction jobs and stabilizing income is important. In particular, policies such as strengthening customized employment safety nets considering the high proportion of daily workers in the construction industry, supporting reemployment through vocational training, and easing financial burdens are needed. Also, it's important to strengthen the role of the public sector during economic downturns to maintain essential infrastructure investment and create conditions for private construction demand to recover.
In the mid to long term, it's necessary to improve the constitution of the construction industry and secure new growth engines. Strategies are required to respond to industry paradigm shifts such as smart construction using digital technology, eco-friendly construction, and expansion of the remodeling and maintenance market. Also, efforts should be made in parallel to create a job environment attractive to young people and to promote technology transfer and innovation to increase the sustainability of the industry.
Ultimately, the current construction industry crisis can be seen as both a challenge and an opportunity. This is because while responding to short-term difficulties, it can be a turning point for developing into a more innovative and sustainable industry in the long term. If the government, businesses, workers, and society as a whole cooperate to successfully lead this structural transformation, the construction industry can continue its role as an important axis of the national economy in the future.