A diagnosis by the Bank of Korea revealed that the threshold for youth employment is rising further as the industrial structure is reorganized around information technology (IT) manufacturing and companies’ preference for experienced workers strengthens due to the proliferation of artificial intelligence (AI). The analysis is that structural factors such as changes in the industrial structure and the dual structure of the labor market are acting complexly on the sluggish youth employment, making fundamental resolution difficult through job policies alone.
The ‘Sluggish Youth Employment and Policy Tasks’ released by the Bank of Korea on Oct. 26 contained the diagnosis, “There is a limit to fundamentally resolving the youth employment problem solely through job policies, which are measures on the labor supply side, and a comprehensive approach that parallels industrial policies and the improvement of the labor market structure is required.”
The Bank of Korea viewed that while quantitative indicators such as the unemployment rate and employment rate of the youth have recently been deteriorating, they are not at a prominent level compared to past periods of sluggishness. However, it reported that the tendency of qualitative deterioration in employment, such as the increasing proportion of temporary and daily workers among employed youths, has been clearly confirmed.
The Bank of Korea analyzed that such qualitative sluggishness in youth employment is the result of a strengthened tendency for the youth to enter the secondary market downwardly due to stagnant demand in the primary labor market. The primary labor market is characterized by relatively high wage levels and stable employment, while the secondary labor market is characterized by being open and having frequent mobility.
It is the perspective of the Bank of Korea that the stagnant demand in the primary labor market is due to the South Korean industrial structure being reorganized around IT manufacturing, which has low job creation capacity for regular workers. This means a structural discrepancy is emerging where economic growth fails to lead to the expansion of demand in the primary labor market.
In addition, the Bank of Korea judged that the sluggish demand in the primary labor market is accelerating in tandem with the recent rapid proliferation of AI technology. This indicates that the preference for experienced workers is strengthening, centered on jobs and industries with high AI exposure, and the demand for entry-level and basic tasks primarily handled by the youth is decreasing.
The Bank of Korea also expressed concern that even if demand in the primary labor market recovers, employment sluggishness could be prolonged because there are not enough pathways for the youth accumulated in the secondary market to move back.
The Bank of Korea said, “In terms of industrial policy, it is necessary to create conditions where the high growth trend of the IT manufacturing sector can spread to related industries and the domestic demand sector, while organic linkage between education and industry is needed to satisfy the labor demand required by semiconductor-centered growth and the AI era.”
It added, “In terms of the labor market structure, there is a need to enhance the flexibility of the employment system so that the youth can smoothly enter and move within the labor market.”