This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

What Happened

• In response to COVID-19, businesses and banks are attracting older consumers to contactless platforms.
• The government’s elderly employment programs are currently suspended due to concerns around the coronavirus. 83% of the senior workers have been involuntarily furloughed.
• The government has put forward a new plan to deal with the employment crisis. However, the plan focuses on jobs in digital industries, which are more difficult for elderly workers to access.

Implications: Elderly poverty jeopardizes the further growth of South Korea’s digital consumer economy. Digital services recently enjoyed rapid growth due to social-distancing measures implemented to contain the COVID-19 outbreak – and older citizens represent one of the fastest-growing consumers on contactless platforms. However, consumption by this cohort is limited because of the share of elderly citizens who live in relative poverty. Further damaging the purchasing power of older consumers, COVID-19 has forced many of them to suspend work due to their vulnerability to the infectious disease. The government’s efforts to deal with the broader employment shock is focused on creating more jobs in digital industries. Unfortunately, older workers are not suited to these positions and it is expected to intensify economic challenges for older furloughed workers.

Context: Elderly poverty is one of the biggest challenges facing the Moon administration. Workers rapidly face relative poverty as they grow older because of the weak pension system. In response to this challenge, the government has been increasing the budget for creating jobs for elderly workers. However, efforts to date have been criticized for being inefficient because they focus on increasing short-term employment instead of improving the quality of jobs that would also deliver higher wages. Lack of financial literacy is also considered as one of the main reasons for senior poverty. In response, banks were planning to strengthen digital financial education for seniors, but all plans are suspended due to COVID-19.

Korea View was edited by Yong Kwon with the help of Gordon Henning, Soojin Hwang, Hyungim Jang, and Ingyeong Park.

Picture from user Bridget Coila in Flickr.

By Jihyun Joung

Known for its “inhumanely long” workweek, South Korea ranks second place for the longest work hours among the Organization for Economic Co-operation and Development (OECD) members. This work culture has widespread consequences in Korean society – the younger generation are increasingly straying away from marriage, and the country hit record-low birth rates in 2017, a fact that President Moon Jae-in attributed to the country’s work-life imbalance.

To tackle these problems, President Moon sought to revise the Labor Standards Act, reducing Korea’s maximum working hours from 68 hours to 52 hours a week for all companies with more than 300 employees, with smaller companies to follow in 2020 and 2021. Violating the new regulation could result in a two-year sentence or a fine of up to 20 million won ($17,900).

With this legal modification, Moon pledged to improve workers’ quality of life, create more jobs, and increase the birth rate. But while these seem like positive goals that anyone can get behind, the response to this new law is more mixed. In a recent survey by local employment portal site Job Korea, about half of respondents had a positive view of the change, with many saying that productivity would improve but also expressing concern about losing overtime pay. Despite divided opinions from the public towards a shortened working week, the National Assembly’s Environment & Labor Committee passed the reform bill on February 28, and it went into effect July 1.

Many workers may benefit from a shortened workweek. Prior to the reform bill, individuals barely had any time or energy after work. Today, they relish in having spare time for leisurely activities such as cooking, watching movies, or going to the gym. Others enjoy the cutback of mandatory company gatherings or meals, known as hwesik, which are normally held after work.

However, not everyone appreciates the newly passed law. For example, some workers claim they are suffering from loss of income, and that they are taken advantage of when their bosses technically log 52 work hours but make them work overtime without being paid. Likewise, businesses claim they will lose money and productivity after the implementation of the law. For example, in the past, they were able to send workers on business trips abroad to gain more profit and partnerships. With the reduced working hours prohibiting weekend or overnight business trips, companies are suffering.

Not only do workers essentially lose income, but also receive more stress at work. Cutting down on work hours does not necessarily mean that the workload diminishes. On the contrary, workers are faced with higher work intensity, as they are obliged to complete assignments within a shorter period of time. One smartphone developer told Chosun Ilbo, “we have to go home at 5:30 p.m. no matter what, but if we are assigned work after 4 p.m., it’s hard to accommodate the request on the same day. If we leave work on time, the boss gets on our case the following day about the lack of progress. What are we supposed to do?” This is the reason to why workers have been spotted hurriedly completing their work in cafes nearby their workplace long after work hours.

Believed to improve living conditions for workers, Moon’s work-life balance campaign has ironically aggravated the situation, and lawmakers have already introduced a six-month grace period for the rest of 2018 to allow companies to adjust to the change without incurring a fine. Nonetheless, it is too early to assume the success or failure of the amendment. Perhaps this campaign can bring about an abrupt change to the deep-rooted working culture of South Korea. Looking forward, it may simply be a matter of time for people to adjust to this sudden modification.

Jihyun Joung is an incoming Masters student in Economic and Political Development at Columbia University. She is currently an Intern at the Korea Economic Institute of America. The views expressed here are the author’s alone. 

Photo from Pixabay.

By Nathaniel Curran

One thing that shocks most first time visitors to Korea is the ubiquity of coffee shops. You can’t find anywhere in Seoul that isn’t a short walk to the nearest café. The sheer magnitude of Korea’s passion for coffee is best expressed through numbers: Korea boasts the highest per capita number of cafes in the world. The result being there are an estimated 80,000 cafes in a country slightly smaller than Kentucky. While that number is staggering, the growth of the café industry is even more mind-boggling; back in 2011, Korea boasted only a measly 12,400 cafes. Even if one goes with a more conservative estimate in 2015 that put the number of cafes at around 50,000, the industry has undeniably grown by a factor of least five in the last decade.

While not as uniquely Korean as the noraebang (karaoke rooms) that seem to stud most streets in Korea, coffee culture permeates every neighborhood in Seoul, with tiny boutique cafes competing alongside behemoth Korean chains like Ediya Coffee, which as of last year boasted 1,800 stores.

Far from home, close to coffee

If you ever find yourself off the beaten path, perhaps on a deserted highway, be assured coffee will not be difficult to procure; convenience stores and rest-stops across carry dozens of varieties of pre-bottled coffee. These include heated cans of coffee as well as many varieties of refrigerated specialty coffees, such as white chocolate mochas and caramel macchiatos.

In addition, instant coffee is easy to come by in Korea. Sugary, delicious, and distributed in single-serving tubes that can also double as impromptu stirring sticks, they require only the addition of hot water. Even though consumption of instant coffee has declined in recent years, it was still an almost $900 million industry as of 2015. However, most Korean cafes would be loath to be considered in the same breath as instant coffee. Specialty coffee shops in Korea often charge more than 10,000won ($8) for their drinks, which advertise beans sourced from far flung locales and that are carefully curated by hagwon certified baristas.

From Gojong to Gangnam

Coffee came to Korea in the late 19^th century, and Korea’s last monarch, Gojong, was a coffee fan, and the backer of Korea’s first coffee shop. Despite that initial foray into java, the modern Korean coffee habit owes its origins to the instant coffee powder that was common in American military bases during and after the Korean War. Instant coffee dominated the market for years, until, with the advent of Starbucks in Korea in the late 1990s, the Korean public was introduced to the joys of espresso. Now, espresso dominates the café market, with the singular “Americano” becoming Korea’s drink of choice.

Sadly, Korea’s more traditional beverage, tea, has not fared well against the onslaught of cafe-ization; the tea market has been cut in half since the late 2000s, while coffee sales climbed an incredible 1,598 percent.

The future of coffee in Korea

Experts have repeatedly predicted that Korea’s coffee market has reached saturation and that the glory days of café culture is coming to an end, only to be proven wrong. In fact, the intense competition in the café market has only given rise to more variations on the traditional coffee shop, including sleep cafes and exotic animal cafes that feature civet cats and wallabies.

While it’s hard to imagine that Koreans will drink even more coffee in the future, or that any possible ideas for cafes have not yet been exhausted, I’m confident that Korea will surprise us yet. In the meantime, Koreans can rest on the laurels of their vibrant coffee industry. Although Korea often gets called out for its overreliance on exports, what greater proof is there of a developed domestic economy than a country with a $5.7 billion dollar coffee market?

Whatever the future of cafes and coffee in Korea, the last two decades have been a heyday for Italian espresso machine makers, who are undoubtedly toasting a new sort of “Miracle” (or perhaps, “Americano?”) on the Han.

Nathaniel Curran is a PhD student at USC’s Annenberg School of Communication and a 2017 COMPASS Summer Fellow. The views expressed here are the author’s alone.

Photo from Dorothy’s photostream on flickr Creative Commons.

By James Do

With the success of Korean popular culture reaching many countries around the world, especially Europe, South America, the Middle East, and Southeast Asia, video streaming service Netflix is trying to capitalize on the success of Korean entertainment. By riding on the popularity of its original content (House of Cards, Orange is the New Black) and incorporating Korean media into their library, Netflix is now in a prime position gain a market share in the entertainment industry in Korea.

Since Netflix expanded its service globally, the company began to offer more Korean movies and television shows onto its streaming library. Many of its programs tend to be more recent releases such as the movie Tunnel or Train to Busan, which both premiered in Korean cinemas in 2016. The company has also picked up several Korean television shows including The Sound of your Heart and My Only Love Song. In addition, many older famous Korean movies and television shows such as Assassination, Old Boy, and Descendants of the Sun are currently available to watch. In fact, Netflix now offers more Korean movies or television shows than Japanese or Chinese content.

We can see this trend continuing with Netflix’s investment into its upcoming film, Okja. Directed by the renowned Korean director Bong Joon-ho (The Host, Snow-piercer), Okja serves as Netflix’s official entry into the Korean entertainment market. Okja is a movie about a young country girl, Mija, (Ahn Seo-hyun) who stops at nothing to defend her newfound friend, Okja, a pig-like animal genetically created to be used for human consumption. During her adventure to save her beloved friend, she takes on an evil corporation led by a powerful CEO (Tilda Swinton) who seeks nothing but to profit from Okja and her species. Mija befriends animal rights activists (Paul Dano, Steven Yeun, and Lily Collins) who assist her in her quest to save Okja.

While the plot of the movie evokes a sense of adventure, the film itself is without controversy. Netflix recently announced that the film would be released both in theaters and online in Korea, a first for the company, which has never pushed to have their own content released through cinema or television broadcasting. After the announcement, major Korean theater chains opposed Netflix’s plan to release the movie simultaneously, as movies there are typically screened in theaters and made available online after a few weeks. CGV, Korea’s largest cinema chain, refused to screen the film, while Megabox and Lotte Cinema are still debating.

Bong Joon-ho, Okja’s director, explained that while trying to cater to its subscription base, Netflix went against the existing norms and systems of the existing Korean film industry. However, although the film remained controversial to big theater outlets, many independent theaters agreed to premier Okja.

In addition to Netflix’s controversial role in the Korean film industry, the film also garnered attention at the Cannes Film Festival. While the film was invited to be premiered at the festival, it was omitted from award consideration, since the movie was not planned for theatrical released in France – a rule that was introduced after the lineup for this year’s festival was settled. Bong stated “[The festival] invited us and then caused a stir, making us embarrassed. They should have put the rules in place and then invited us. How can I as a filmmaker study local French laws while making films?”

With all the controversies over Okja, what will the future of Netflix and the Korean film industry be? The popularity of Korean entertainment globally has influenced Netflix to ride the Korean wave by entering a market that continues to grow immensely not just in Korea but abroad. As Netflix hopes to increase its user base, it’s possible the company will seek to invest in other films and television programs in countries where online streaming remains popular.

 With streaming becoming ubiquitous among younger generations, film industries must change their business model to incorporate more recent trends. The way we watch and engage in film and televisions has already immensely changed from the previous decade. To meet the needs of contemporary times, companies and organizations need to develop an environment where filmmakers are motivated but also given more recent standards of support. With its innovative model of simultaneous physical and online premieres, Netflix is at the forefront of these changing times. Now it is up to the film industry and its community to change their policies to reflect current digital trends.

James Do is a graduate student at the Fletcher School of Law and Diplomacy focusing on International Security Studies and Pacific Asia and an intern at the Korea Economic Institute. The views expressed here are the author’s alone.

Photo from TFurban’s photostream on flickr Creative Commons.

By Juni Kim

The runaway success of Kakao’s mobile messaging app can be easily seen by its near universal use in South Korea. From high school students to working professionals, three-quarters of South Korea’s 50 million residents use Kakao’s free messaging service monthly with an additional 10 million monthly users outside of South Korea. Despite rapid growth over the past decade, Kakao faced a daunting hurdle when the South Korean Fair Trade Commission (FTC) labeled it and other similarly– sized companies as “big business groups” this past April. The new designation subjected Kakao to the FTC’s antitrust regulations, which also applies to South Korea’s much larger chaebol conglomerates like Samsung and Hyundai.

The FTC designation illustrates the fear that smaller Korean companies hold of potentially being caught by tighter regulations after continued growth. Companies like Kakao are caught in the crossfire of the Korean government’s efforts to promote growth in smaller firms while simultaneously attempting to manage antitrust regulations.

Criticism and controversy surrounded the new designation, which also labeled companies Celltrion, Harim Group, Korea Investment Holdings, Kumho Petrochemical, and SH Corporation as big business groups. Industry analysts noted the unfair grouping of Kakao’s total assets with much larger companies. According to Kakao’s website, the company’s total assets are about 5.19 trillion won ($4.5 billion US), easily dwarfed by conglomerate companies such as Hyundai Motor’s reported total assets of 165 trillion won ($143 billion) and Samsung Electronic’s assets of 230 trillion won ($200 billion).

In the wake of the FTC designation, the Federation of Korean Industries (FKI), a lobbying group for South Korean companies, released a report critical of the new designation. It stated that the designation excessively regulates companies like Kakao, citing the total of 60 newly assigned regulations authorized through 27 acts. Lee Chul-haeng, the FKI head of corporate policy, publicly stated, “We demand that the government either raise the asset floor for large corporation from 5 trillion won to 10 trillion won, or limit the list of large companies to the top 30 in terms of asset size.”

Concerns of excessive regulations on companies like Kakao have not gone unnoticed by South Korean President Park Geun-hye. Since March 2014, President Park’s administration has held five top-level meetings to discuss and encourage deregulation reform in an effort to encourage economic growth among burgeoning industries. The most recent meeting occurred at the Blue House only a few weeks after Kakao’s designation as a big business group. President Park specifically addressed Kakao’s growth challenges in that meeting by stating, “Companies like Kakao will be restricted if they are labeled as big business groups. In this situation, what company would want to continue to grow?” She further added, “Labeling big business groups as conglomerates is a system only found in Korea, and it needs to change according to the times.”

The FTC ultimately yielded and announced this month that the designation of big business groups will be changed from combined company assets of 5 trillion won to 10 trillion won, which effectively removes Kakao from the list. FTC Secretary General Shin Young-sun acknowledged industry criticisms of the previous designation by stating, “If the same level of regulation is applied to all these companies, it could affect the growth of the smaller members of the group, and we have decided to raise the standard.”

Kakao executives surely welcomed the news of the raised FTC designation. Kakao’s current plans for a web-based bank would have been subject to stiff restrictions if the FTC designation remained in place. However, challenges still remain for Kakao as it continues to expand. Despite its relative small size compared to larger chaebols, Kakao has been investigated before for possible abuses of its dominant market power in South Korea. Any further similar actions by Kakao may put it under the scrutiny of the FTC again and justify restrictive measures. Although it may be far from becoming its own chaebol, Kakao is not immune to future antitrust regulations.

Juni Kim is the Program Manager and Executive Assistant at the Korea Economic Institute of America (KEI). Jiwon Nam, an Intern at KEI and graduate student at the University of Maine, also contributed to this blog. The views expressed here are the author’s alone. 

Photo from Ben Hancock’s photostream on flickr Creative Commons.