Korea iso­lated from youth job mar­ket boom

The Korea Times - - FINANCE - By Lee Kyung-min [email protected]­re­atimes.co.kr

The youth unem­ploy­ment rate in Korea has been ris­ing over the past few years due to fast-dis­ap­pear­ing de­cent jobs amid eco­nomic slug­gish­ness com­pounded fur­ther by de­clin­ing growth po­ten­tial, data showed Wed­nes­day.

This is in stark con­trast to ma­jor coun­tries’ young job mar­kets that have con­tin­ued to im­prove on the back of state poli­cies de­signed to cre­ate more jobs for young job­seek­ers.

The growth prospects for the Asia’s fourth-largest econ­omy are be­com­ing bleaker due to the rigid la­bor mar­ket and fast-aging pop­u­la­tion, for which there are no short-term so­lu­tions, econ­o­mists said.

Data from Sta­tis­tics Korea and the Or­ga­ni­za­tion for Eco­nomic Co­op­er­a­tion (OECD) showed the youth unem­ploy­ment rate in Korea was 10.5 per­cent in 2018, up 0.2 per­cent­age points from the year be­fore.

Korea is the only coun­try with this prob­lem among rel­a­tively ad­vanced economies.

The com­pa­ra­ble rate for the U.S. was 8.6 per­cent in 2018, down 4.7 per­cent from 13.3 in 2014, while that of Ja­pan fell to 3.6 from 6.2.

The U.K. saw the rate de­crease from 16.9 per­cent to 11.3 per­cent in the same pe­riod.

The OECD av­er­age dropped from 15.1 per­cent to 11 per­cent.

Ris­ing youth unem­ploy­ment is driven partly by many job­seek­ers re­fus­ing to work for smaller firms and only ap­ply­ing for high-pay­ing jobs at large com­pa­nies. An­other key cul­prit is the gov­ern­ment’s rigid la­bor poli­cies.

Ac­cord­ing to an anal­y­sis report re­leased by the Bank of Korea, the av­er­age monthly salary was 2.3 mil­lion won ($1,900) for those at smallto medium-sized en­ter­prises (SMEs) with 50 work­ers or fewer in 2015, com­pared to the av­er­age 4.3 mil­lion won monthly salary of those at large con­glom­er­ates with over 300 work­ers.

The ris­ing youth unem­ploy­ment could lead to in­equal­ity be­tween the em­ployed and the un­em­ployed, given the rigid la­bor poli­cies struc­tured to dis­pro­por­tion­ately pro­tect the for­mer, ac­cord­ing to an ex­pert.

“Un­der the cur­rent la­bor poli­cies and reg­u­la­tions, busi­nesses have lit­tle dis­cre­tion over la­bor cost man­age­ment,” said Kim So-young, an eco­nomics pro­fes­sor at Seoul Na­tional Univer­sity.

“Hir­ing and fir­ing is nearly im­pos­si­ble, which is a ma­jor rea­son busi­nesses are re­luc­tant to go for new hires. This means bleaker prospects for job­seek­ers and a dan­ger­ously height­ened sense of com­pla­cency among the em­ployed.”

The gov­ern­ment should put top pri­or­ity on dereg­u­la­tion to boost la­bor pro­duc­tiv­ity and en­cour­age busi­nesses to in­crease new hires, ac­cord­ing to Yun Chang-hyun, an econ­o­mist at the Univer­sity of Seoul.

“The low birthrate is a prob­lem for which there is no short-term so­lu­tion. So the an­swer is to boost cor­po­rate investment and pro­duc­tiv­ity via cre­at­ing a busi­ness en­vi­ron­ment by promptly re­mov­ing heavy, un­nec­es­sary reg­u­la­tions. This will help busi­nesses to con­sider in­creas­ing la­bor costs,” he said.

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