Korea isolated from youth job market boom
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.