The government has unveiled a plan to tackle youth unemployment. It announced relevant measures in a meeting presided over by President Moon Jae-in on March 15. Today, we’ll discuss whether the new plan will effectively address the nation’s chronic youth unemployment amid a worsening job crisis that is described as an “employment cliff.” Here is Park Jeong-il, a member of the Presidential Committee of Job Creation and professor of the Department of Computer Science at Hanyang University, to explain the new measures in detail.

The comprehensive plan was announced a month and a half after President Moon instructed his officials on January 25 to create jobs for young people, even by injecting emergency funds. The new measures show that the government has mobilized all possible policy means available, including the budget, tax breaks, subsidies and a system improvement. The focus is placed on four areas such as providing incentives to small-and mid-sized firms that hire young people, nurturing new startups, increasing new job opportunities overseas and creating a new market in the service sector. The government will also overhaul an education system to encourage young people to get jobs first and study later.
For instance, those who are hired at small-and mid-sized companies will be allowed to go to college to learn their job expertise. The government will build a new management system where those who served as specialists in the military will have their experience recognized when applying for jobs. Also, startups set up by young people will be exempt from corporate and income taxes. Nine-hundred-thousand won of allowances will be provided to young jobseekers for three months this year, 300-thousand won for each month. The program will expand to 3 million won for six months next year, 500-thousand won for each month.


The Moon Jae-in government has set a goal of lowering the youth unemployment rate to below eight percent by creating up to 220-thousand more jobs between 2018 and 2021. To this end, the government established three principles, which are pragmatic support to young job hunters, the creation of jobs in the private sector and direct, temporary subsidies to young people. One of the measures is focused on closing the wage gap between smaller and large companies. The pay gap is the main reason for young jobseekers’ reluctance to start their career in smaller companies, even though most of the job openings are at small-and medium-sized enterprises or SMEs. To remedy the situation, the government will raise the real annual wage by more than ten million won for young SME workers for the next three to four years. An average annual starting salary of 25 million won offered by SMEs will then get closer to the average 38 million won at large companies. SMEs, for their part, will get a nine million won subsidy if they hire a young jobseeker as a regular worker, while a tax reduction period will be extended for large firms hiring young people. In this way, the government has strengthened its direct support and tax benefits, in consideration of the serious youth unemployment situation.

The youth unemployment rate in Korea soared after the Asian financial crisis and reached nine-point-nine percent in 2017, nearing the double-digit mark. It is the worst-ever level since 2000. Last year, the total number of the unemployed surpassed one million, while 483-thousand people stopped looking for jobs. One in every ten young person remains unemployed. The real youth unemployment rate, which includes those who have given up seeking employment altogether and those engaging in part-time jobs to prepare for more decent jobs, stood at 22-point-seven percent last year, up zero-point-six percentage point from the previous year. On a gloomy note, the situation is expected to worsen further over the next three to four years due to the population structure. According to Statistics Korea, the number of people aged between 25 and 29 with the highest demand for jobs hit a low of three-point-26 million in 2014 but will rise steadily to reach three-point-67 million by 2021.

The gap between the overall jobless rate and the youth unemployment rate has been widening, more than doubling from the 1990s. Also, the real unemployment rate has never fallen below 20 percent since relevant statistics began to be compiled in 2015. An even more intense competition is anticipated in the job market, as the so-called “echo-boomers” who were born between 1991 and 1996, or children of baby boomers, will enter the market starting this year. It is true that previous governments adopted various policies to curb the high level of youth unemployment. Unfortunately, the situation has not improved.

Previous governments announced employment policies as many as 21 times over the last ten years, but they failed to resolve the youth unemployment problem. There are various reasons. First, the government’s support was focused mostly on creating jobs that young people did not really want. Second, there were inadequate policies to induce economically inactive people to enter the labor market themselves. Third, the employment policies were mostly separate from industrial policies, failing to generate the synergy effect. To create more quality jobs that will appeal to young people, the government should learn a lesson from previous policies and come up with a new one.

Previous policies were mostly about increasing the number of jobs, including part-time jobs and internships, rather than creating decent jobs. Not to repeat the same mistake, the Moon government has formulated a plan aimed at producing pragmatic effects. For instance, it will solve structural problems in the employment market by using finance and tax incentives to increase quality jobs in the private sector and creating new demand for jobs. But the government still has an issue to deal with before the measures have the intended effects.

The success of the Moon government’s first employment policy depends on whether the administration will manage to secure a supplementary budget to finance those projects. If opposition parties disagree, the plan might go adrift as the major projects included in the new measures rely on the extra budget. Without the supplementary budget, it will be impossible to carry out the projects of boosting payroll subsidies for small businesses hiring young people and helping young employees build a 30 million won nest egg over three years. The government is considering offering loans for apartment deposits at an annual interest rate of one-point-two percent and subsidizing commuting costs of 100-thousand won every month. It will also provide a monthly allowance of 500-thousand won to young jobseekers for six months. But the timing of the execution of these plans will be determined by the supplementary budget.

The government has decided to set up a supplementary budget of four trillion won, which is about three-point-six billion U.S. dollars. It plans to make the most of last year’s remaining budget in order not to worsen fiscal health. Still, it will not be easy for the extra budget bill to get parliamentary approval, with opposition parties criticizing the government for throwing money at the situation without any fundamental solution. In response, the government says that it will execute the measures only on a temporary basis, given that emergency measures will be needed to tackle the unemployment crisis triggered by the influx of the eco-boom generation in the next three to four years.
Obviously, the youth unemployment problem is so grave that financial input is necessary. But analysts are pointing out that the government should find a more fundamental solution, while implementing the emergency measures.

I think long-term and consistent investment is necessary for the employment policy to work properly. No advanced country in the world has resolved the youth jobless problem in a short period of time. Germany and Britain succeeded in raising the youth employment rate more than five percent for five years, thanks to long job training for youth and consistent labor policies. Increasing jobs for young people has much to do with creating new jobs in line with the development of new technologies. First, it is important to figure out where quality jobs can be created. There are job opportunities in the core areas of the Fourth Industrial Revolution, such as artificial intelligence, the Internet of Things, three dimensional printing, self-driving vehicles, virtual reality, cloud computing, block chain technology and smart cities. The government should ease regulations concerning the new technologies so it can create a favorable environment for corporate investment and provide new jobs in those areas to young people.

Youth unemployment is the result of the structural problems faced by the Korean economy, along with growth without hiring and insufficient investment from large companies. It is difficult to handle this matter without a paradigm shift. The government will have to promote the Fourth Industrial Revolution and make other efforts from a longer perspective.