[The Editors' Verdict] Populism Is the Root Cause of Worsening Youth Employment

In an unusual trend, South Korea has experienced a simultaneous decline in both its youth population and youth employment opportunities. According to Statistics Korea's "May 2021 Economically Active Population Survey Supplement on Youth," this trend worsened compared to the previous year. The youth population (ages 15-29) decreased by 1.5% compared to May of last year, and for the first time, the proportion of youth within the population aged 15 and older fell below 20%. Meanwhile, the time it takes for young people to find employment has increased, and even those who succeed in getting jobs mostly find low-wage positions, leading to a rise in both the unemployed and those preparing for employment exams. The survey results show that after graduating from university, young people spent an average of 10 months unemployed, and over 70% of those who found jobs earned less than 2 million won per month. The number of job seekers increased by a staggering 6.8%, with one-third of them focused on preparing for civil service exams, which rose by 4.1 percentage points. As employment conditions worsened, the number of long-term unemployed increased, with those unemployed for over one year rising by 2.9 percentage points and those unemployed for over three years increasing by 1.2 percentage points.

Unlike South Korea, most countries are seeing a decrease in youth unemployment rates. This is because technology is rapidly changing and new industries are emerging. When the youth population declines, young people become more valuable, and it is normal for their employment opportunities to increase. However, some countries do not follow this pattern. Incorrect policies driven by populism hinder youth employment. The Korea Economic Research Institute analyzed youth employment indicators from OECD member countries between 2009 and 2019 and found significant differences by country. Italy, a G7 advanced economy facing an economic crisis, saw its youth population decline while youth unemployment increased. In contrast, the United States, which is widening its growth gap with other advanced countries, experienced an increase in youth population and a decrease in youth unemployment. Germany, leading the European economy, saw a decline in youth population but reduced youth unemployment, thereby recovering its growth rate. Denmark, with a stable economy, experienced an increase in youth unemployment but maintained its growth rate due to a growing youth population.

The deterioration of youth employment is rooted in institutional problems. According to the theory of varieties of capitalism, which compares capitalism internationally, countries with more regulations on economic activities and rigid labor markets tend to have lower birth rates, declining youth populations, and higher youth unemployment rates. Countries with fewer regulations and more flexible labor markets show the opposite trend. Italy belongs to the former group, while the United States belongs to the latter. South Korea, which once shared many similarities with the United States, is now declining like Italy. Populism exploits inequality to incite the public, strengthens government control over the economy, and increases fiscal spending, but ultimately fosters social distrust and hampers economic activity. Italy became a G7 country through high growth and low unemployment but shifted to low growth and high unemployment due to populism. As seen in the Economically Active Population Survey Supplement on Youth, the worsening youth employment under the Moon Jae-in administration’s income-led growth policy is also due to its populist nature.

Currently, South Korea is caught in a populist whirlwind. Although the minimum wage was raised, youth jobs decreased, and only low-wage youth workers increased. Nevertheless, the leading candidate of the ruling party for next year’s presidential election has pledged an annual basic income of 1 million won for all and 2 million won for youth. However, there is no mention whatsoever of institutional reforms to address the worsening youth employment situation.

The fortunate aspect is that young people recognize the causes of the employment deterioration. According to public perception surveys on jobs conducted by Statistics Korea and the Ministry of Culture, Sports and Tourism, the proportion of people demanding government support to solve job problems is twice as high as those requesting income support, and among youth, it is three times higher.