hankyoreh

A graduate at Dongguk University in Seoul passes by an employment information pamphlets

The problem of youth unemployment in South Korea - with 9.2% of young people (15-29 years) out of a job last year, the highest level in 15 years - is similar to the youth unemployment faced by Japan after the bubble burst in the early 1990s, one analyst says.

“Some believe that the South Korean economy is developing in a similar way to the Japanese economy, just with a lag of 20 years. As it happens, the youth unemployment rate in South Korea is increasing just as it did in Japan 20 years ago,” wrote Ryu Sang-yun, chief researcher for the LG Economic Research Institute.

Ryu made the argument in a report titled “How the South Korean Youth Unemployment Problem Resembles Japan‘s Long-Term Recession,” which was released on Mar. 15.

In the 1950s and 1960s - when the Japanese economy grew at a rate of around 10% each year - the youth unemployment rate was just 2%, and even in the 1980s, it remained low, around 4%.

Japan had a number of distinctive practices for helping young people enter the workforce: companies would maintain relationships with high schools and snap up their promising graduates, and companies would arrange to hire entire batches of universities students before they had even graduated.

Companies would hire these youngsters based on their potential, not their ability. They trained new employees for their work and guaranteed them long-term employment.

But after the bubble burst, the Japanese growth rate plummeted to 1%, while the youth unemployment rate soared to 10.1% (in 2003). This was the consequence of the practice of long-term employment, which meant that efforts to reduce the workforce focused on hiring fewer new employees.

The quality of jobs deteriorated, with more young people becoming “freeters,” or freelancers who get by on part-time jobs. This also led to social problems, including NEETs, or young people who are “not in education, employment or training.”

While the youth unemployment rate began to improve after 2003, this was because of a rapid decrease in the youth population.

If there is no innovative improvement in productivity, South Korea’s potential growth rate is expected to drop to 2.5% in the next five years and to around 1% in the 2020s, which is similar to the situation in Japan in the early 1990s. South Korea is also witnessing the same trend toward a smaller youth population.

“Given the trends in Japan, it appears that we will not be seeing a qualitative improvement in youth employment until the mid-2020s at the earliest,” Ryu said. The mid-2020s is when South Korea’s youth population is likely to begin declining in earnest.

“Back then, the university admission rate in Japan was only 30%. Since South Korea’s admission rate is over 70%, more university diplomas won‘t lead to higher employment. South Korea is therefore at a disadvantage to Japan 20 years ago,” Ryu said.

“The fundamental solution for youth employment is a recovery of the potential growth rate through bold structural reform and the creation of a new engine for growth.”

By Lee Soon-hyuk, staff reporter

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