Stagnant growth of South Korea's service sector is contributing to the country's high jobless rate among young people, a state think tank said Wednesday, calling for measures to galvanize the industry.

To help solve the problem, there is a pressing need to build up the country's service sector in such areas as logistics, finance and insurance, education, health care, tourism, contents creation and software development, the Korea Development Institute said in a related forum.

"The service sector is fast emerging as a growth engine in the global economy," the KDI said. "But the country's inability to create service jobs is effectively restricting improvements in youth employment."

According to data, the number of positions in these areas accounted for 27 percent of all jobs in the country in 2009, but it backtracked to 26 percent in 2013.

One of the reasons is the way the country's large conglomerates are vertically integrated, which has held back the service sector's growth, it said.

Last year, the average unemployment rate for South Koreans between the ages of 15 and 29 stood at 10.1 percent, which is higher than the Organization for Economic Cooperation and Development average of 9.7 percent, and much higher than numbers posted by Japan and the United States.

The jobless rate for South Koreans in the same age group fell to 7.9 percent last month, but this is still 2.5 times higher than the national average of 3.2 percent.

"In the 1990s, the unemployment rate for men between 25-29 was lower in South Korea than in Europe, but nowadays the numbers have been upturned with conditions being worse here," the KDI said.

The KDI said South Korea suffers from having a weak knowledge-intensive service sector compared with other advanced industrialized economies.

There has also been a sharp weakening of business dynamism in the wake of the 1997 Asian financial crisis, as companies cut back on making investments, the think tank said, adding this trend has hurt the job market for young people. (Yonhap)