Jinkeun Yu Korea Institute for Industrial Economics and Trade (KIET) An Analysis of Global Value Chain (GVC) Income and Jobs and Its Implication for the Workforce Policy

Ⅱ Research Methodology and Data Ⅰ Introduction Ⅲ GVC Income and Jobs, All Manufactures Ⅳ GVC Income and Jobs, Korea’s IT Manufactures Ⅴ Current State of Korean IT Industry’s GVC Ⅵ Implication for the Workforce Policy

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German value added7966 High-skilled labor1617 Medium-skilled labor3425 Low-skilled labor74 Capital2120 Foreign value added2134 High-skilled labor36 Medium-skilled labor69 Low-skilled labor44 Capital815 Total final output100 Source: Timmer et al. (2014), “Slicing Up Global Value Chains”, Journal of Economic Perspectives, Spring 2014

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6 Production Factors: Capital, Labor (High-skilled, Medium-skilled, Low-skilled) Data: WIOT, SEA

7 Source: Timmer et al. (2014), “Slicing Up Global Value Chains”, Journal of Economic Perspectives, Spring 2014 Final Product of a GVC, Identified by Country and Industry of Completion Value Added Country 1...Country N Industry 1... Industry S … Industry 1... Industry S Value Added from Countr y-Industries Participating in GVC Country 1 Industry 1 … Industry S...… Country N Industry 1... Industry S Total Final Output Value World GDP

8 World GVC Income

Brazil Canada China Germany France UK India Italy Japan Korea Mexico Russia USA ROW World GVC Income (Billion $, 1995 price) 6,5856,0367,0137,7549,564 World GVC Income/ World GDP (%)

10 World GVC Jobs

China 215, , , , ,136.1 (31.7)(27.7)(31.6)(32.1)(30.2) Germany 10, , , , ,555.1 (26.8)(27.2)(26.4)(24.5)(25.1) France 5,004.05,406.64,978.44,766.74,623.2 (22.0)(22.2)(19.8)(18.7)(18.1) UK 5,615.85,360.34,314.43,713.34,340.9 (20.1)(18.1)(13.9)(12.0)(13.2) Japan 15, , , , ,041.6 (22.6)(20.7)(18.7)(17.3)(17.4) Korea 6,067.85,800.95,457.25,308.25,743.5 (29.7)(27.4)(23.9)(22.6)(23.7) USA 21, , , , ,866.5 (16.0)(14.7)(12.0)(10.4)(10.9) Total 40 Countries 507, , , , ,517.0 (28.1)(25.8)(26.8)(26.5)(25.7)

12 Korea’s GVC Income and Jobs

Food, Beverages and Tobacco Textiles Leather and Footwear Wood Products0.2 Pulp, Paper, Printing and Publishing Coke, Refined Petroleum, Nuclear Fuel Chemical Products Rubber and Plastics Non-Metallic Mineral Basic Metals and Fabricated Metal Machinery Electrical and Optical Equipment Transportation Equipment Other Manufacturing (Total 14 Manufactures)(62.2)(65.7)(66.9)(66.3)(69.0) Wholesale Trade Retail Trade Financial Intermediation Business Services Korea's Total GVC Income(Billion $, 1995)

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Change Food, Beverages and Tobacco Textiles Leather and Footwear Wood Products Pulp, Paper, Printing and Publishing Coke, Refined Petroleum, Nuclear Fuel Chemical Products Rubber and Plastics Non-Metallic Mineral Basic Metals and Fabricated Metal Machinery Electrical and Optical Equipment Transportation Equipment Other Manufacturing (Total 14 Manufactures)(3,387.6)(2,820.1)(-567.5) Wholesale Trade Retail Trade Financial Intermediation Business Services Korea's Total GVC Jobs6,067.85,

16 World GVC Jobs by Skill Type

17 WIOD skill-type1997 ISCED level1997 ISCED level description Low1 Primary education or first stage of basic education Low2 Lower secondary or second stage of basic education Medium3(Upper) secondary education Medium4Post-secondary non-tertiary education High5First stage of tertiary education High6Second stage of tertiary education

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19 High-SkilledMedium-SkilledLow-SkilledGVC Jobs China ,948.8 Germany ,086.5 France ,004.0 UK ,615.8 Italy ,353.2 Japan ,083.0 Korea ,067.8 USA ,483.9 Total 40 Countries ,751.5 High-SkilledMedium-SkilledLow-SkilledGVC Jobs China ,194.8 Germany ,016.8 France ,766.7 UK ,713.3 Italy ,109.4 Japan ,036.4 Korea ,308.2 USA ,147.8 Total 40 Countries ,280.5

20 Factor Shares in GVC

21 CapitalHigh-SkilledMedium-SkilledLow-Skilled China Germany France UK Italy Japan Korea USA Total 40 Countries CapitalHigh-SkilledMedium-SkilledLow-Skilled China Germany France UK Italy Japan Korea USA Total 40 Countries

22 GVC Incomes and Jobs

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GVC Income Share GVC Jobs GVC Income Share GVC Jobs GVC Income Share GVC Jobs GVC Income Share GVC Jobs GVC Income Share GVC Jobs Australia China Germany Japan Korea (IT Manufactures)(41.7)(341.3)(39.7)(377.9)(38.5)(325.6)(35.2)(270.8)(38.3)(299.8) Taiwan USA ROW4.3n.a.6.6n.a.6.9n.a.8.3n.a.8.1n.a. World GVC Income (Billion $, 1995) and Jobs , , , ,295.5

25 GVC Jobs by Skill Type

26 High-SkilledMedium-SkilledLow-SkilledTotal 1995 Korea138.6(23.6)327.6(55.8)121.2(20.6)587.3 Foreign25.1(9.1)120.2(43.9)128.6(47.0)273.9 Total 40 Countries163.6(19.0)447.8(52.0)249.8(29.0) Korea249.3(31.6)430.2(54.6)109.1(13.8)788.6 Foreign64.9(9.7)317.5(47.3)289.6(43.1)672.0 Total 40 Countries314.2(21.5)747.7(51.2)398.6(27.3)1, Korea289.1(42.6)339.1(49.9)51.2(7.5)679.3 Foreign72.6(10.9)288.5(43.2)307.2(46.0)668.2 Total 40 Countries361.8(26.8)627.5(46.6)358.3(26.6)1, Korea258.3(43.0)296.0(49.3)46.1(7.7)600.4 Foreign64.0(11.8)234.8(43.3)243.6(44.9)542.4 Total 40 Countries322.3(28.2)530.8(46.4)289.6(25.3)1,142.7

27 Factor Shares in GVC

28 CapitalHigh-SkilledMedium-SkilledLow-Skilled 1995 China Japan Korea USA Total 40 Countries China Japan Korea USA Total 40 Countries China Japan Korea USA Total 40 Countries China Japan Korea USA Total 40 Countries

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30 Source: Choi et al., GVC and the Workforce Policy, KIET, 2015 R&D Design ProcurementProduction Marketing/ Service GVC Domestic Global Planning / Design Components & MaterialsAssembly / Production Marketing, Distribution, A/S Key parts Common Key Offshoring Global Marketing Network * High rate of Internalization in Key parts * Participate in Global Firms’ GVC(Apple) * New High-Tech goods * Common Parts : China, Southeast Asia * Key parts : USA, Japan, Europe * Share of Overseas Production : 80~90% * Key Location : China, Vietnam

31 Source: Kim et al., Structural Change of GVC in the Korea’s ICT Industry and Development Strategies, KIET, 2014 Desirable Capacity Level Current IT Industry’s Smile Curve Value Added High Low Disparity Index Current GVC Capacity Planning/ Design R&DProcurementAssembly/ Production DistributionMarketing/SaleCustomer Service (Production)(Pre-Production)(Post-Production)

32 Vietnam AffiliateGumi Plant Pool of High School Graduates Available for Recruitment 220,000 20,000-60,000 Monthly Salary for Production Job$250$3,284 Corporate Income Tax Rate 0-4 year: Exemption 5-16 year: 5% 17- : 10% 22% Source: Maeil Economy, Apr. 23, 2013

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