OECD Economic Surveys: Korea 2022
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Sound health management and supportive policies helped Korea emerge swiftly from the pandemic. The recovery is set to continue as pandemic-era restrictions on contact-intensive services are shelved, despite the Russia-Ukraine war raising inflation and highlighting the need to increase supply chain resilience. Reducing dependence on fossil fuels can boost resilience, but is also necessary to reach ambitious climate targets. Fiscal policy support will need to be scaled back and should focus on supporting people and business dynamism rather than firm survival. The productivity gap between small and large, highly productive companies is reflected in labour market dualities of income, job quality and social protection. Gaps in the social safety net largely follow the same fault lines, and a large share of elderly are left with very low retirement income. These inequalities spur fierce competition among young men and women to enter prestigious universities and good jobs and slows down youth’s labour market entry and family formation against a backdrop of a very low fertility rate.
SPECIAL FEATURES: SOCIAL SAFETY NET, YOUTH EMPLOYMENT
Also available in: French
Policies to increase youth employment in Korea
Korea’s low youth employment rate has negative consequences for the young people concerned and the economy as a whole. Raising youth employment is a priority, particularly as Korea faces the most rapid population ageing among OECD countries. Low youth employment is due to a mismatch between education and the labour market, reflecting a large skill gap between highly-educated youth who race for credentials to secure attractive careers and older workers retiring from jobs that require less human capital. The share of university graduates among young Koreans is the highest in the OECD, but their employment rate is relatively low even as small firms confront serious labour shortages. Dualism in the labour market (between regular and non-regular workers) and the product market (between small and large firms) encourages young people to queue for jobs in large firms and the public sector to avoid low-wage precarious jobs. Raising the youth employment rate requires breaking down dualism while reforming the education system. Vocational education in secondary schools, which has shrunk while becoming another route to tertiary education, should be improved to make it a direct path to employment. Expanding the approach of Meister schools and the work-learning dual programme would help in that regard. Tertiary education should become more flexible and responsive to the demands of employers. Active labour market policies should focus less on direct job creation and more on job placement and training.
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