Despite economic growth driven by a semiconductor export boom, young people are facing increasing barriers to stable employment. The expansion of artificial intelligence (AI) has further reduced new hiring opportunities, making it difficult for youth to escape unstable jobs even as they lower their expectations.
There are growing calls for the introduction of the 'National Activity Allowance System,' which would support income during vocational training and childcare periods as part of the AI transition.
Job Opportunities for Youth Decline by 15-20% Amid Semiconductor Growth
According to a report released by the Bank of Korea on October 26, the employment rate for young people aged 15 to 29 fell from 46.6% in 2022 to 43.7% in the first nine months of this year. During the same period, the unemployment rate slightly increased from 6.4% to 6.6%.
More concerning than the unemployment rate is the deterioration in job quality. Young people are increasingly settling for unstable jobs, such as temporary or part-time positions, rather than waiting for quality employment. The quality index for youth employment calculated by the Bank of Korea averaged below 95 from January 2023 to September 2023, with 100 set as the average since 2010, excluding the COVID-19 period.
Compared to the core age group of 30 to 59, the relative entry rate of young people into stable jobs is estimated to have decreased by 15-20% from 2023 to 2026. The proportion of youth moving from the secondary labor market to the primary labor market in companies with over 300 employees dropped from around 8% between 2014 and 2019 to about 5% in 2023 and 2024. Once young people enter unstable jobs, it becomes increasingly difficult for them to transition to better positions.
At a public forum held by the National Economic Advisory Council on the same day, experts noted that the link between economic growth and employment has weakened. Jang Ji-yeon, a senior researcher at the Korea Labor Institute, stated that the employment elasticity of economic growth in the first half of this year was 0.10, only one-third of the average from 2000 to 2025. The share of employee compensation in nominal GDP also fell from 47.9% in the second quarter of last year to 41.1% in the second quarter of this year.
Jang expressed concern, saying, "The extent to which growth translates into employment is less than one-third of the past average, which cannot be explained solely by the declining population growth rate."
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The backdrop for these observations is the growth centered on high-value, capital-intensive industries like semiconductors and changes in corporate hiring practices. The Bank of Korea noted that while production is led by the information technology (IT) manufacturing sector, the proportion of stable job hiring is higher in non-IT manufacturing and service sectors, making it difficult for economic growth to translate into expanded youth employment.
The spread of AI could widen this gap further. Jang highlighted that since November 2022, youth employment in occupations with high exposure to AI has decreased by about 17%. In a survey of 35 occupations conducted by the Labor Institute, it was observed that companies are replacing existing outsourced tasks with AI, leading to a reduction in entry-level work and a decline in pay rates.
Concerns have also been raised that companies are reducing new hires instead of laying off existing workers, which could eliminate opportunities for youth to gain job experience and develop skills. In response, the Bank of Korea suggested that industrial policies and labor market structural improvements should be implemented simultaneously to support youth in entering the labor market or transitioning to better jobs. Jang also proposed linking support for small businesses in AI transition (AX) to new youth hiring and increasing opportunities for skill transfer to middle-aged workers.
During the forum, proposals were made to address income gaps that arise during transitions. Hong Kyung-jun, a professor of social welfare at Sungkyunkwan University, suggested the need for a system that guarantees income during periods of training and childcare. He proposed the introduction of a virtual national activity account for all citizens aged 18 to 64, where eligible individuals participating in vocational training or childcare would receive payments.
The first phase of the 'Basic National Capability Allowance' would provide 60-70% of the median income for up to 12 months during career transitions for current and job-seeking individuals, as well as training periods for youth entering the workforce. The second phase would introduce income-proportional supplementary benefits for childcare support, including those not covered by employment insurance, for a maximum of 24 months.
Hong estimated that if the take-up rate for the flat-rate allowance is assumed to be 1%, it would require approximately 3.1 trillion won annually, and if the rate is 3-5%, it would need between 9.4 trillion and 15.7 trillion won. He suggested using future response funds and general accounts for financing, with a pilot operation planned for 2028-2029 and full implementation by 2030. Hong emphasized the need to shift from a reactive approach after job loss to a proactive investment strategy before transitions occur.
* This article has been translated by AI.
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