South Korea’s Youth Unemployment

New graduates the world over leave university clutching their diplomas and holding dear starry aspirations of impending career success. In South Korea, that means landing a job at one of the top conglomerates or as a respected civil servant in the public sector – a goal long held as the Korean dream.

But as many young job-seekers find out, particularly in an economy under stress, things hardly ever go as planned. This year, Korea's top conglomerates are weathering the slowing growth rate by cutting back on new hires, while turmoil in the shipbuilding industry is predicted to ripple into the rest of the economy.

These conditions will only prolong the record-high youth unemployment rate that has long pained the Korean economy. Creating jobs for young people was the key focus of President’s Park Geun-hye’s “creative economy,” a multibillion-dollar plan to diversify the country’s growth engines that includes fostering a tech startup ecosystem. It was also purportedly a key concern behind Park’s economic democratization pledge.

But for all the money and effort spent on these policies, the youth unemployment rate has surpassed 10 percent for all of 2016 so far, peaking at 12.5 percent in February before easing to 11.8 percent in March. Last year, one out of six young workers in South Korea were paid less than the country's minimum wage of 5,580 won ($4.90) per hour, while one in three single-person households are malnourished. Youth unemployment is only part of a slew of economic problems that include an aging society and burgeoning household debt and which threaten social stability, and it may be leading to others such as the delayed marriage age, low childbirth rates, and overall pushing back the start date on young Koreans’ independent adult lives.

On top of the low rate of job creation in a slowing economy, the job market is less fluid as the retirement age rises and people stick to their jobs in uncertain economic conditions. Young people feel less responsibility than in the past to financially take care of their elders, making the older generations even more uneasy about leaving work.

Like many of Korea’s goals to become the financial and tourism hub of the region, it has tried an infrastructure-based solution by building tech startup facilities. Just because something is built, however, does not mean they will come.

“As a whole, the creative economy concept, like a lot of things that [the Korean government has] done, had some good ideas,” says Brandon Walcutt, an economics professor at Hankuk University of Foreign Studies in Seoul. “But intentions are one thing, and the reality of what they did to achieve those were quite different.”

Yet policymakers may have their hands tied. Cultural standards are stressing the economic woes, he says. Young people – and their parents – still largely fail to shake off the Korean dream, and continue to stigmatize the alternatives.

“A lot of my students don’t even see the possibility of themselves becoming entrepreneurs. Either they want the guaranteed paycheck or they don’t want the risk associated with doing something, because if they have direction and they fail … there’s not a lot of second chances,” he says. “That right there will put a major damper on this whole creative economy.”

Small and medium enterprises (SMEs) are still hiring, but young graduates are often wary of applying to them as it will be harder to transition into a big business. Further, some solutions that other countries have promoted, such as vocational high schools, have seen a lukewarm local response. The new tech startup boom is picking up some interest, but not at the pace that is necessary for today’s job creation needs, economic observers have noted.

Walcutt, who teaches university seniors, says many would rather bide their time in education than work in a lower-level firm. And that is, he thinks, one of the biggest reasons why college graduates don’t have jobs.

“It’s not that the jobs aren’t there, per se. Their expectations are too high,” he says. “There’s a lot of jobs that they could potentially be doing and they just don’t.”

For its part, the government is trying to incentivize working at SMEs, for example, by matching the savings of young workers to create more wealth, but observers are wary of its potential. It has also promoted incentivizing science and technology studies, thereby giving new graduates a more pragmatic, practical background to propel them into the workforce. But Walcutt observes that those policies are not actually being followed by changes in the curriculum that would make the STEM education less theory-based and more useful for working in a company.

In the long term, culture needs to open up to globalization. Diverse education, stronger entrepreneurship, openness to foreign business, and making it easier to get a business visa would all help the job creation environment. Fostering an entrepreneurial spirit – inspiring young graduates to work for smaller, innovative companies or even start their own – would have a bigger long-term impact on job creation than the government encouraging the creation of makework jobs that temporarily expand the workforce, which, Walcutt claims, is just a different form of unemployment.

Only when mindsets change can the creative economy revolution come to fruition. But that doesn’t happen overnight.

“They’ve got a long way before they can really sink their teeth into the creative economy and actually make it pay off in terms of creating lots of jobs,” Walcutt says.

“But a quick and easy solution – I don’t have one.”