1. 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

2. 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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4. 4 19952008 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. 6 Production Factors: Capital, Labor (High-skilled, Medium-skilled, Low-skilled) Data: WIOT, SEA

7. 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. 8 World GVC Income

9. 9 19952000200520092011 Brazil2.52.02.23.13.3 Canada1.92.4 2.12.3 China4.25.88.714.916.7 Germany9.47.27.96.96.5 France4.43.94.23.93.1 UK3.84.23.82.62.4 India1.71.82.43.03.2 Italy4.44.04.33.83.2 Japan17.514.210.07.87.6 Korea2.1 2.21.72.0 Mexico1.52.72.52.02.2 Russia1.21.11.92.22.8 USA19.924.320.116.715.0 ROW11.311.712.714.115.6 World GVC Income (Billion $, 1995 price) 6,5856,0367,0137,7549,564 World GVC Income/ World GDP (%) 23.122.120.719.720.9

10. 10 World GVC Jobs

11. 11 19952000200520092011 China 215,948.8199,375.7239,458.9250,194.8244,136.1 (31.7)(27.7)(31.6)(32.1)(30.2) Germany 10,086.510,654.510,267.210,016.810,555.1 (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 15,083.013,504.211,965.810,036.410,041.6 (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 21,483.921,724.817,854.915,147.815,866.5 (16.0)(14.7)(12.0)(10.4)(10.9) Total 40 Countries 507,751.5497,263.1548,320.9554,280.5553,517.0 (28.1)(25.8)(26.8)(26.5)(25.7)

12. 12 Korea’s GVC Income and Jobs

13. 13 19952000200520092011 Food, Beverages and Tobacco5.34.53.83.63.1 Textiles6.05.94.03.83.4 Leather and Footwear0.90.70.50.3 Wood Products0.2 Pulp, Paper, Printing and Publishing2.92.21.91.81.7 Coke, Refined Petroleum, Nuclear Fuel0.81.21.40.91.2 Chemical Products5.74.14.44.34.5 Rubber and Plastics2.22.43.22.72.9 Non-Metallic Mineral1.11.0 0.91.1 Basic Metals and Fabricated Metal6.36.18.77.79.7 Machinery6.16.77.27.06.9 Electrical and Optical Equipment12.618.517.816.918.4 Transportation Equipment10.410.311.615.214.6 Other Manufacturing1.7 1.21.11.0 (Total 14 Manufactures)(62.2)(65.7)(66.9)(66.3)(69.0) Wholesale Trade4.74.54.24.34.2 Retail Trade1.31.81.92.12.0 Financial Intermediation5.53.83.53.73.8 Business Services5.55.96.87.57.1 Korea's Total GVC Income(Billion $, 1995)142125156135193

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15. 15 19952011Change Food, Beverages and Tobacco269.9170.3-99.6 Textiles665.7261.8-403.9 Leather and Footwear110.232.7-77.4 Wood Products15.916.60.6 Pulp, Paper, Printing and Publishing129.6104.8-24.8 Coke, Refined Petroleum, Nuclear Fuel18.530.512.0 Chemical Products172.5107.7-64.9 Rubber and Plastics139.8172.933.1 Non-Metallic Mineral50.342.8-7.4 Basic Metals and Fabricated Metal247.9302.454.5 Machinery389.2363.9-25.4 Electrical and Optical Equipment624.6629.75.1 Transportation Equipment443.2506.763.6 Other Manufacturing110.277.2-33.1 (Total 14 Manufactures)(3,387.6)(2,820.1)(-567.5) Wholesale Trade514.4494.7-19.8 Retail Trade142.7248.6105.8 Financial Intermediation195.4136.7-58.7 Business Services203.9618.5414.6 Korea's Total GVC Jobs6,067.85,743.5-324.4

16. 16 World GVC Jobs by Skill Type

17. 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. 19 High-SkilledMedium-SkilledLow-SkilledGVC Jobs China1.422.676.0215,948.8 Germany18.463.518.110,086.5 France17.643.738.65,004.0 UK16.943.839.35,615.8 Italy5.132.662.36,353.2 Japan16.663.020.415,083.0 Korea23.349.027.66,067.8 USA22.663.613.821,483.9 Total 40 Countries5.330.764.0507,751.5 High-SkilledMedium-SkilledLow-SkilledGVC Jobs China3.826.569.7250,194.8 Germany24.660.415.110,016.8 France31.445.423.24,766.7 UK28.548.123.43,713.3 Italy11.346.642.06,109.4 Japan23.066.510.510,036.4 Korea40.648.810.65,308.2 USA29.060.510.515,147.8 Total 40 Countries8.033.858.2554,280.5

20. 20 Factor Shares in GVC

21. 21 CapitalHigh-SkilledMedium-SkilledLow-Skilled China50.91.315.931.9 Germany26.121.143.79.1 France31.719.528.020.8 UK36.016.727.020.2 Italy31.05.922.340.8 Japan40.314.535.210.0 Korea24.224.434.616.9 USA39.620.734.55.2 Total 40 Countries38.615.031.115.3 CapitalHigh-SkilledMedium-SkilledLow-Skilled China60.33.413.922.5 Germany25.028.839.76.5 France28.330.428.512.8 UK27.728.831.212.3 Italy24.711.936.027.4 Japan45.517.332.74.6 Korea32.932.729.15.3 USA45.024.927.23.0 Total 40 Countries44.117.326.312.3

22. 22 GVC Incomes and Jobs

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24. 24 19952000200520092011 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 Australia0.73.40.75.40.94.11.23.41.64.6 China1.2146.32.6385.44.9437.38.5370.78.9426.1 Germany1.45.11.512.42.113.52.011.01.611.5 Japan8.723.09.048.36.941.25.927.34.826.8 Korea70.6587.362.7788.664.0679.360.0600.461.8669.7 (IT Manufactures)(41.7)(341.3)(39.7)(377.9)(38.5)(325.6)(35.2)(270.8)(38.3)(299.8) Taiwan0.97.11.721.81.927.52.228.12.132.6 USA7.828.59.550.86.829.35.518.25.222.3 ROW4.3n.a.6.6n.a.6.9n.a.8.3n.a.8.1n.a. World GVC Income (Billion $, 1995) and Jobs 23.3861.237.71,460.536.91,347.630.21,142.743.91,295.5

25. 25 GVC Jobs by Skill Type

26. 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)861.2 2000 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)1,460.5 2005 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)1,347.6 2009 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. 27 Factor Shares in GVC

28. 28 CapitalHigh-SkilledMedium-SkilledLow-Skilled 1995 China55.11.819.323.7 Japan39.516.335.48.7 Korea34.621.632.711.2 USA39.124.332.73.9 Total 40 Countries35.920.532.511.0 2000 China57.92.620.718.8 Japan40.518.335.26.0 Korea46.021.926.25.8 USA35.129.232.43.3 Total 40 Countries44.421.227.56.9 2005 China63.93.816.715.6 Japan43.419.433.34.0 Korea43.030.623.43.0 USA35.433.029.02.6 Total 40 Countries43.727.124.54.8 2009 China70.04.314.714.1 Japan42.619.533.94.0 Korea40.432.024.43.1 USA36.633.927.22.3 Total 40 Countries43.127.324.45.1

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30. 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. 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. 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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38. Thank You