Increased online consumption is positive for price stability… Negative impact on employment

An analysis found that the expansion of online consumption is having the effect of lowering prices, but is having a negative impact on employment in some industries. Jiyeon Kim, a researcher at KDI, presented the economic ripple effects and implications of the increase in online consumption through the presentation of the report ‘The Impact of Expansion of Online Consumption on Prices and Employment’ held at the Ministry of Strategy and Finance on the 29th.

Expansion of online consumption, positive impact on prices

Researcher Kim Ji-yeon explained, “With the recent surge in online consumption, the revitalization of e-commerce is contributing to lowering prices.” According to the report, the reason why the inflation rate is suppressed due to the increase in online consumption is because products can be provided at lower prices than offline prices by reducing distribution stages and reducing store operating costs. Additionally, as price comparisons become easier online, competition is promoted, which is creating downward pressure on prices, the so-called ‘Amazon effect’.

The report analyzed that the proportion of online consumption increased from 14% to 27% from 2017 to 2024, which had the effect of lowering product prices by about 2.4% during the same period. Considering the proportion of goods in consumer prices, the expansion of online consumption is estimated to have lowered consumer prices by about 1.1% between 2017 and 2024.

Downward pressure on employment… Declining employment in wholesale, retail, and restaurant industries

On the other hand, the spread of online consumption was found to have a negative impact on offline employment in wholesale and retail, lodging and restaurant industries. KDI used a structural vector autoregressive model to analyze the short-term impact on employment if the proportion of online consumption increases rapidly. In the case of the wholesale/retail industry and the lodging/restaurant industry, the expansion of online consumption took a toll on offline sales and the restaurant industry, leading to a decline in employment.

Researcher Jiyeon Kim (briefing video capture)

According to the report, in the lodging and restaurant industry, when the proportion of online consumption increases by 1 percentage point, the increase in the number of employed people decreases by up to 27,000 people after the second quarter, and this ripple effect appears to last for two years. The wholesale and retail industry also saw a decrease in employment growth by up to 27,000 people in the quarter of the shock, but the impact was analyzed to be relatively short-term. Meanwhile, in the transportation and warehousing industry, demand for delivery and logistics increased due to the expansion of online consumption, resulting in increased employment.

Need to adapt to changes in employment across industries… Emphasis on retraining and transition support

Researcher Kim said, “Job creation has occurred in some industries, but the expansion of online consumption is putting downward pressure on overall employment, so an economic response is necessary.” It was mentioned that there is a need to support the expansion of online sales channels for workers in traditional offline industries and to help them transition to new industries by strengthening retraining for workers in the wholesale, retail, and restaurant industries.

In addition, as the proportion of specially employed workers is increasing in the delivery and logistics sector, it is necessary to establish a social safety net to ensure a stable working environment for these workers. This suggests the need for policy responses that can resolve employment instability while the development of e-commerce and promotion of competition play a positive role in price stability.

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