Six months have passed since President Moon Jae-in came to power vowing to fight youth unemployment, but there has been almost no progress.
Job growth is stuck at around 200,000-300,000, and the youth unemployment rate scales fresh records every month. Critics fear the worst has yet to come when welfare policies like the minimum wage hike and conversion of temporary workers to regular employees kick in next year.
◆ Soaring Youth Unemployment
Statistics Korea said last week that 26.9 million people were employed in October, up 279,000 from the same period a year ago. But unemployment among people aged 15 to 29 stood at a whopping 8.6 percent in October, the highest in 18 years. And real youth unemployment is estimated at 21.7 percent, the highest since the government began tallying the figure in 2015.
A growing number of people are simply giving up. Last month, 483,000 people gave up searching for jobs, up 34,000 people on-year. Some 1.69 million Koreans opted not to work even though they are physically capable of having jobs, an increase of 228,000.
The Ministry of Strategy and Planning said, "Amid a shortage of jobs favored by young Koreans, downsizing in the construction industry is threatening to put more jobs at risk."
Even though the economy is expected to grow to the three-percent range this year thanks to booming exports, job growth remains below two percent. "As long as growth continues to center on the IT industry, which requires fewer workers than other sectors, unemployment will remain high," said Kim Soo-hyun at Hyundai Research Institute.
◆ Gov't Miscalculation
The government has taken several risky gambles. It increased the minimum wage for next year by 16.4 percent at W7,530 per hour, with the aim of bringing it to W10,000 by 2020 (US$1=W1,100). In addition, it is pushing private businesses to grant regular employment to irregular or contract workers.
The extra financial burden on companies could discourage many businesses from hiring or prompt them to lay off staff. One business source said, "Except for semiconductors and a few other industries, financial conditions are extremely tight, so the added wage burden will make it tougher to hire more workers."
Small and mid-sized companies will be hit hardest by the measures. One self-employed businessman said, "Real economic conditions are not good, and our liabilities are increasing all the time. Even if the government provides subsidies, I wonder if I'll be able to continue my business after paying my workers' wages."
Experts recommend drastic labor reforms. The International Monetary Fund said last week that the government must give businesses more flexibility in hiring and firing if it wants to reduce youth unemployment.
But the government insists on labor-friendly policies alone. Park Ji-soon at Korea University said, "I doubt that the employment policies of the Moon Jae-in administration will be sustainable. Rather than allocating taxpayers' money across the board, the government needs to tackle fundamental issues like overhauling labor regulations."