Basic Report

This paper study the role of productive local finance for regional employments through the regional employment analysis by industries. The second chapter of the study examines domestic and foreign cases of the regional economic downturn caused by environmental changes and the stagnation of the major industries. Chapter 3 suggests that the economic fluctuations of each si-do governments are not only affected by the national common factors, but also their idiosyncratic factors. To analyze the effects of local fiscal expenditures, Chapter 4 presents the positive effects on local tax revenue for the following year when the budget for regional economic revitalization exceeds a threshold. In Chapter 5, we analyze regional employment structure by industry. Chapter 6 presents the current status and direction for the improvement of job policies of central and local governments.
   Our research shows that active fiscal expenditure for stagnant regional economies is not just expenditure, but it also helps regional economic recovery. The result suggests the need for an active fiscal policy on the national level as well as on the regional government level. On the other hand, the idiosyncratic movement of regional economies leads to the necessity of a customized local fiscal policy for each region. The structure of the national and regional economies is quite different, suggesting that policy priorities for active fiscal commitment may vary.
   To meet the needs of regional job creation strategies, this study provides an analysis of the employment structure by industry. Using the economic survey released by the National Statistical Office, the indicators of 'Employees per company', 'Sales per company', 'Employees per 100 million won', and 'Wages per employee' are calculated by industry classification. The labor intensity of each industry could be judged by the suggested indicators, and the results are to be used to establishing regional employment priorities. In addition, the employment indicators by industry are extended by each si-do governments, and the characteristics of the employment structure were derived. The regional employment indicators presented in this study are meaningful because they suggest priorities for industries that can increase job creation capacity per unit of fiscal investment.
   Next, examining the proportion of budgets by type shows that as of 2019 employment incentives 25.2%, direct job creation 16.1%, start-up support 11%, vocational training projects 8.4% and employment services 4.6% make up the national government's job creation budget. When evaluating the status of local job creation strategies, local governments have plans to attract new industries in their region, but there is a lack of support for residents to be employed in those newly created jobs. Therefore, rather than focusing on a new industry that all local governments are trying to attract competitively, the policy measures should be focused on industries that have high job creation ability through the employment indicators analysis in each region.
   The Korean economy has traditionally pursued export-oriented economic growth based on manufacturing-based industrial structures. Main industries such as automobile, machinery, shipbuilding, and steel, which are Korea's major manufacturing industries, have developed in clusters around specific regions. For example, automobiles have been concentrated in industrial base cities such as Ulsan and Gunsan, machinery in Changwon, and Shipbuilding in Geoje, and the local economy of these cities has been accompanied by the ups and downs of those industries. During the period of high growth, when the region's flagship industry was in full swing, cities such as Ulsan, Gunsan, and Geoje were able to enjoy the fruits of a growing population and local economy. However, the situation of some municipalities, where the international competitiveness of the flagship industry falls, requires an active fiscal capacity to overcome the current regional downturn. In other words, we need to be cautious not to follow the same fate of U.S. rust-best regions where the industrial decline led to regional recession as well as regional decline.
   To that end, we first suggest that it is necessary to diversify regional industries when the region heavily relies on a specific industry. The advantages of industrial diversification are evident when comparing regions with diversified industrial sectors and regions that do not. When a particular industry is decayed or extinguished by external shocks, a region with a diversified industrial portfolio will be able to move easily labor forces to another industry. In other words, in areas where the industry is well-diversified, the economic downturn will be relatively less likely to result in a population decline due to the population movement searching for jobs.
   Second, it is necessary to prepare policy measures to prevent residents who are unemployed from finding their jobs outside of their current residence. At present, Korea's demographic structure can be summed up as a low birthrate and an aging population, and the total fertility rate is on the decline despite policy support for population growth. In other words, the maintenance of sustainable local communities should focus on preventing the outflow of current residents, rather than inflows from other regions. In order to prevent the outflow of the population, it is necessary to consider the policy to keep the migrants seeking jobs to stay in the region.
   Finally, local governments must recognize the impacts of active and productive fiscal policy and play an active role in overcoming the regional economic downturn. The productive fiscal policy, which is recently attracting attention, can enhance the potential growth rate of the Korean economy through population aging, fertility rate, and preemptive investment in aging infrastructure. In the case of local finances, the proportion of self-financing is still low in revenues, and there are not enough resources available for local governments to implement their policies that fit local conditions. Nevertheless, it has been pointed out that the execution and carryover of local government budgets are higher than that of the central government. Therefore, it is necessary to simultaneously identify the causes and increase the execution rate.