"Youth Issues Are Labor Market Issues... Dual Structure Must Be Addressed" [Issue Interview]

Severe Segmentation Between Primary and Secondary Labor Markets in Korea
"Your First Job Determines Your Entire Life"
The Solution Lies in Addressing the Dual Labor Market Structure
Supporting SMEs as a Catalyst for Change
Raising the Retirement Age Also Impacts Youth Employment
"It Could Further Widen the Dual Structure Gap"

"Youth issues are fundamentally labor market issues. The problem of youth employment can only be resolved if the dual structure of the labor market is addressed."

Yubin Kim, Director of the Employment Policy Research Division at the Korea Labor Institute, made these remarks in a recent interview with Asia Economy at a cafe in the Sejong National Research Complex. Having conducted continuous research on youth employment, Director Kim emphasized, "To solve youth issues, we must approach them as problems of labor market structure, but the situation is not improving." She added, "It is necessary to develop policies that are not swayed by changes in government direction."

Yubin Kim, Director of the Employment Policy Research Division at the Korea Labor Institute, is being interviewed at a cafe in the Sejong National Research Complex on the 27th of last month. Photo by Pyunghwa Kim

In Korea, labor market segmentation is particularly severe between the primary labor market?which includes large corporations, regular positions, and unionized jobs?and the secondary labor market, which consists of small and medium-sized enterprises (SMEs), non-regular positions, and non-unionized jobs. As a result, many young people delay employment until they can secure a job at a large corporation, and only in their late twenties, when further postponement is no longer feasible, do they enter SMEs.

Director Kim stated, "In Korea, the job you land when you first enter the workforce determines your entire life trajectory. Once you enter the secondary labor market, it is extremely difficult to move into the primary labor market, no matter how hard you try." She continued, "This is sometimes described as a glass ceiling or labor market rigidity. Because transitions between labor market segments are so rigid, everyone tries to secure a good job from the start."

To fundamentally resolve this issue, eliminating the dual structure of the labor market is essential. However, Director Kim explained that it is difficult to address this with specific policies in the short term, which is why there have been many piecemeal youth employment policies so far. She also pointed out that every time a new administration takes office, especially during changes of government, policies change, and there has been a lack of long-term direction.

Director Kim explained, "We cannot force companies to reduce the wage gap between the primary and secondary labor markets. It may be more efficient for the government to provide support." She added, "If the government directly supports workers and gives them incentives to work at SMEs, and if this becomes a trend, it could encourage more people to choose SMEs even without wage subsidies."

Director Kim further elaborated, "Overall industrial issues need to be resolved for wages to rise, but conversely, if wage support encourages people to work at SMEs, and as a result, SMEs operate better and productivity increases, wage levels could rise and the overall structure could change. While the industrial sector must make efforts on its own, I believe there are also roles that employment policy can play."

Amid the ongoing difficulties in youth employment, the issue of extending the retirement age must also be considered carefully. There are concerns that increasing the statutory retirement age from 60 to 65 could reduce youth employment opportunities. While some argue that the substitution effect between jobs for older and younger workers is not significant, Director Kim pointed out that this does not hold true when looking specifically at jobs preferred by young people.

Director Kim noted, "There may not be a significant substitution effect or negative impact across all jobs, but if we narrow it down to jobs that young people prefer?such as those at large corporations or public institutions?the situation is different. These jobs have no vacancies unless someone leaves, so extending the retirement age creates a negative impact for young people."

She also expressed concern, saying, "In academia, it is considered impossible to extend the retirement age without reforming the wage system. While this may be an issue mainly for large corporations or the public sector, if the retirement age is extended, the gap between the dual labor markets could widen even further." She added, "The core problem is that the statutory retirement age of 60 is not actually functioning. Except for production jobs at public institutions or large corporations, the main retirement age is actually in the late forties to early fifties, so extending the retirement age has little practical significance."