[Editorial] Focus on jobs

The economic cost of young people who "just rested" while not actively seeking employment is estimated to have totaled 44.5 trillion won ($31.8 billion) for the five years spanning 2019 to 2023, according to a Federation of Korean Industries study on Monday.

The cost was calculated on the assumption that they missed out on earning about 80 percent of the wages that employed youth earned.

The population of young Koreans aged 15-29 shrank by 870,000 over the same span, while the number of "discouraged youth" increased from 360,000 to 400,000.

The number of college graduates who just rested and their share in discouraged youth are noteworthy: They increased in both cases — from 132,500 to 153,400 and from 36.8 percent to 38.3 percent.

In February, the number of discouraged youth topped 500,000 for the first time.

The problem is not that young people are not willing to work, but that there are not enough jobs for them. According to a recent survey of more than 2,000 manufacturing companies across the country by the Korea Chamber of Commerce and Industry, over 80 percent of them were struggling for a limited share of demand in a "red ocean." About 60 percent could not afford to make new business plans. Manufacturers have historically propped up the South Korean economy, but they are in a dire situation where they dare not increase employment.

Young people prefer to work at large companies, but there is a limited number of such decent jobs. To make matters worse, large companies want mostly experienced workers. This discourages many college-educated people. About 140,000 job openings were posted in the first half of the year, and 82 percent of them sought experienced staff. Less than 3 percent were set aside for job seekers without experience.

Last year, college graduates accounted for 41 percent of discouraged youth, marking their largest portion on record. This, too, was attributable to companies looking for experienced staff.

Labor market rigidity, which the older generation has maintained to protect their vested interests, is another problem. The seniority-based salary system and militant labor unions, coupled with pro-labor government policies, have made it difficult for companies to flexibly adjust the cost of retaining employees. These conditions make companies reluctant to expand employment.

Furthermore, the older generation is even demanding that the statutory retirement age be raised to 65. According to a Bank of Korea study comparing employment among the older and younger generations after the retirement age was raised to 60 in 2016, the addition of one worker to the older group aged 55-59 led to a decrease of 0.4 to 1.5 young workers during the 2016-2024 period. A further extension of the retirement age is likely to expand the pool of discouraged youth.

The average age at which a college graduate first joins a company surpassed 30 a few years ago. This was largely attributable to a tighter job market and higher qualification barriers for securing stable, regular jobs. With employment preparation taking longer, the number of discouraged youth has increased.

Worse yet, the situation of young people shows no signs of improving. Last month, the number of discouraged youth reached 420,000, an all-time high for the month of July. The Korea Development Institute, one of the nation's leading think tanks, forecast that annual employment growth will contract from 160,000 jobs last year to 150,000 this year and 110,000 next year.

Structural reform cannot be put off any longer. The basis of the salary system should be changed from seniority to merit. Flexibility in the labor market should be increased. Debates on raising the retirement age might as well be put on hold until youth employment conditions improve. These steps are not only for young people but also for the sustained growth of the Korean economy.

Yet the government seems more interested in strengthening the rights of labor than in creating jobs. To stem the tide of discouraged youth, it needs to offer incentives for youth employment.