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A woman looks at recruiting information during a job fair in Seoul.   © Reuters
Asia Insight

South Korean job market leaves young 'remainders' in cold

Gulf between 'chaebol' and smaller employers sows frustration

KIM JAEWON, Nikkei staff writer | South Korea

SEOUL -- Employment in South Korea is about much more than a paycheck. Social status is entwined with one's job title and employer, and anyone without a position at an established company is likely to feel the heavy stigma of failure.

Young people are bearing that burden the most. The unemployment rate among 15- to 29-year-olds -- over 8% -- is more than double the overall figure.

Choi Seo-yoon, 31, knows just how hard it can be. She graduated from a university in Seoul but was unable to land the media job she wanted. To get by, she writes columns for newspapers, helps a friend who sells homemade lemon tea and draws portraits for sale. The money she earns puts food on the table, but it is not enough for her to plan a future.

"I have no confidence that I will make enough money in the long term," Choi said. "I cannot predict my income and expenses beyond a few months ahead. I don't have a credit card to buy things with monthly installments, either. I just pay within my income."

Back in 2012, after trying for two years to get hired by a newspaper or broadcaster, Choi attempted to turn her misfortune into success. She created a magazine called Remainders -- a word she said describes people who have been left behind by the rat race, either because they stopped looking for jobs or they simply refused to follow the conventional crowd.

A figure from Statistics Korea shows there were an estimated 288,000 such people in the 15-29 age bracket as of October, up 18.4% on the year.

Creating Remainders was Choi's alternative to committing to a job she did not want. The magazine covered everything from politics and culture to dating and marriage. But after 18 monthly and bimonthly issues, she ceased publication. She decided it was time to stop chasing a dream and focus on boosting her income through part-time jobs.

It is a familiar pattern among the younger set. Small restaurants and shops run by young owners are continually popping up in Seoul and other big cities, but most quickly fold, victims of high rents and a lack of business acumen. Among 228,460 businesses established by people aged 15-34 in 2011, only 23.5% survived for five years, according to the National Tax Service.

If entrepreneurship is not the answer, then what is?

Political promises

President Moon Jae-in's government has placed job creation at the top of the agenda. It is pushing hard to add positions in the public sector while providing incentives for private companies to boost recruitment.

So far, these efforts have accomplished little.

The unemployment rate for the 15-29 age group reached 8.6% in October, up a tick from 8.5% a year earlier, according to Statistics Korea. The rate for all ages was 3.2%.

South Korea's youth unemployment looks tolerable compared with countries like Italy or Spain. But European nations can point to a long recession after the regional debt crisis. Until recently, many Italian companies were wary of hiring due to strict labor laws that make layoffs difficult even in tough times.

But South Korea's economy is humming along. Gross domestic product growth hit 3.6% in the third quarter, the fastest pace in seven years. The central bank recently decided to raise its key interest rate for the first time in more than six years.

Jobless South Koreans wait to claim benefits at a Korea Employment Information Service office.   © Reuters

The problem is "largely due to a lack of quality jobs in the information and telecommunications industry, and the professional and technology service sectors, which young people prefer," South Korea's finance ministry said in a news release last month. "We will accelerate our efforts to give customized support to the vulnerable, including young people."

A closer look suggests the roots of the matter are tangled up in the very structure of South Korean industry and society.

Yawning gap

The issue is more than a mismatch between the jobs that are available and the jobs young people actually desire. The Organization for Economic Cooperation and Development has pointed out the huge gap in both wages and social status between the chaebol -- large conglomerates dominated by wealthy families -- and small and midsize enterprises. This gulf makes today's young job seekers reluctant to commit to smaller companies.

"Korea faces exceptionally strong labor market segmentation, which is associated with a large productivity gap between large firms and SMEs, and the high share of workers who are employed in very small firms," Ha Hyeong-so, a researcher at the Paris-based OECD, said in a report in June.

Official data highlights the wage divide: Big companies with 300 or more employees paid an average of 4.96 million won ($4,500) in monthly wages in 2016. Those with fewer than 300 workers paid an average of 3.05 million won, according to the labor ministry.

On top of the high wages, employees at conglomerates enjoy fat bonuses at year-end, further widening the income gap with their counterparts in small companies. For instance, Sung, a manager at an affiliate of SK group, will be paid 50% of his yearly salary as bonus later this month thanks to the company's extraordinary earnings this year. He plans to save this for his wedding next year.

"I want to go to Italy for my honeymoon. I am glad that I can tie the knot at the booming season of my company," said the manager who wanted to be identified by his surname only.

Large employers generally offer not only higher wages but also better working conditions, job security and the all-important status. In a society where social standing matters as much as salary, employment with a big-name company can be vital for finding a marriage partner.

Is that not the case everywhere? Perhaps, but in South Korea the scramble for status starts in early childhood and never stops.

It is common for parents to engage private tutors for preschoolers in Korean, English and math to prepare them for the battle ahead. The competition continues in primary and secondary schools, as students cram for places in Seoul's top colleges -- their best hope for getting a quality job after graduation.

Some in South Korea attend extra curricular classes to prepare for job exams.   © Reuters

Wealthier families often send their children to private primary schools where a typical day starts at 8 a.m. and ends at 6 p.m. and fees can be as high as 1 million won per month. In public schools, classes run between 9 a.m. and 3 p.m.

"Seoul National University is on the top of the hierarchy of universities, followed by private schools in Seoul, colleges in the metro Seoul area, national universities in provincial regions and private schools in provincial areas," explained Lee Chul-ho, head of a civic group called the Society without University Cartel. "And inside each university, departments are lined up by the order in which they lead to well-paid jobs."

The International Monetary Fund suggests South Korea's polarization and inequality are only getting worse, marginalizing both young people and the elderly.

After an IMF team's two-week visit to South Korea, Tarhan Feyzioglu, the team's leader, on Nov. 14 remarked in a statement, "Old-age poverty is significantly higher than in the rest of the OECD, and the rate of unemployed and inactive youth is high."

Earlier this year, a Gallup Korea survey of 850 people between the ages of 19 and 31, excluding college students, found the respondents were getting by on an average of 1.58 million won a month. That is only slightly higher than the monthly minimum wage of 1.35 million won.

Stuck with low incomes and little job security, many young people are borrowing to make ends meet. On average, people in the 19-31 age range have 13 million won worth of debt to banks and other financial institutions, according to the country's financial regulator. Some resort to consumer lenders that charge high interest rates, just to pay the bills.

Youth frustration is seen as a key trigger for social unrest in South Korea.   © Reuters

"Lost generation," a term often used in Japan to describe those who faced the vicious job market of the late 1990s, is becoming an increasingly common refrain in South Korea as well.

Some debt-saddled young people express their bitterness by calling their country "Hell Korea." Their anger is widely believed to have been a factor in the Candlelight Revolution -- the protests that erupted against former President Park Geun-hye, who was ousted earlier this year. Some see parallels with the Arab Spring in the early 2010s, which was also driven by young demonstrators.

"I thought our country was hell because our generation was poor compared with our predecessors who enjoyed high economic growth," said Park Ji-hyun, 28, a senior student who studies Japanese literature at Hankuk University of Foreign Studies. "But, there is nothing that I can do to fix this. So, I don't want to think of this [matter] anymore."

But some are moving abroad in the hopes of finding more conducive environments to work and live in, for example, Canada, Germany and Japan. Park, 38, who had worked for a small machinery company in western Seoul, left for British Columbia in Canada earlier this year to become a sushi chef. Even though he knew nothing about making Japanese food, he thought it would be better to leave than to stay at the company that was facing bankruptcy.

He made the decision because he realized that companies in western countries treat workers much better than those in South Korea, something he learned from a language course in his early 20s.

The International Labor Organization has warned of rising social unrest linked to unemployment in a number of places. South Korea, clearly, is not immune. Economists argue the government needs to spend more to tackle youth joblessness, before it leads to more serious problems down the road.

 

We need to create quality jobs by encouraging [companies] to invest in industries related to environment, low births, aging society and the fourth industrial revolution

Kim Joo-young, a researcher at Korea Institute for Industrial Economics & Trade

"The government should consider creating jobs for youth and setting up a social safety net by using state funds," Rhee Chang-yong, the director of the IMF's Asia and Pacific Department, told South Korean reporters in Washington in October. "If we do nothing about youth unemployment and senior poverty, it may cause more demand for state funds in the future."

Kim Joo-young, a researcher at the Korea Institute for Industrial Economics & Trade, said the country should look to new industries with major job-creation potential.

"We need to create quality jobs by encouraging [companies] to invest in industries related to environment, low births, aging society and the fourth industrial revolution," Kim said. "This will increase investments and jobs in energy, transportation services, bio, health and social services."

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