The Paradox of 'Low Unemployment'... Impact of Rising Job Search Abandonment Among Young Adults

KDI "Causes and Implications of the Recent Low Unemployment Rate"
'Resting' Population in Their Twenties Reaches 7.2%... Doubled Over 20 Years

The phenomenon of 'low unemployment rate' in South Korea suggests that structural changes are underway in the labor market, according to a recent analysis. It was pointed out that the decline in the unemployment rate is statistically driven by labor market exits, such as an increase in young people giving up on job seeking.

According to the report "Causes and Implications of the Recent Low Unemployment Rate" released by the Korea Development Institute (KDI) on November 6, "A low unemployment rate does not necessarily indicate an improvement in labor market conditions." The unemployment rate, which was in the mid-to-high 3% range before the outbreak of COVID-19, has remained at a low level in the mid-to-high 2% range this year, even though economic growth has slowed since 2021.

Many job seekers visiting the 2025 Mid-sized Companies Job Fair held at COEX in Gangnam-gu, Seoul on the 23rd are looking at the job posting board. 2025.4.23 Photo by Cho Yongjun

Rise in Job Search Abandonment... 'Resting' Population Among Young Adults Has Surged Over 10 Years

KDI identified the increase in job search abandonment as a key factor behind the decline in the unemployment rate. Those who are capable of economic activity but are not seeking employment for unspecified reasons are classified as the 'resting' population. Among them, a significant number are individuals who are willing to work but have given up searching for jobs due to deteriorating labor market conditions or unmet expectations.

The number of 'resting' individuals as a percentage of the working-age population rose sharply from 1.23 million (3.2%) in 2005 to 2.54 million (5.6%) this year. The increase was particularly pronounced among people in their twenties. Although the working-age population in their twenties has decreased, the number of 'resting' individuals in this age group increased from 250,000 to 410,000 over the same period, a 64% rise. Consequently, the proportion of 'resting' individuals in their twenties doubled from 3.6% to 7.2%.

Among people in their twenties, 30.9% responded that they are 'resting because it is difficult to find a desired job.' This indicates that the decline in youth participation is not simply due to job preparation but reflects a weakening intention to participate in the labor market.

KDI's counterfactual analysis showed that job search abandonment among people in their twenties accounts for 45% to 71% of the drop in the unemployment rate this year compared to 2015. In other words, if the increase in the proportion of 'resting' individuals in their twenties had been more moderate, the current unemployment rate would be approximately 0.4 to 0.7 percentage points higher.

Efficiency of Job Matching Up 11% Over 10 Years... Impact of Platform Expansion

There are also positive factors contributing to the decline in the unemployment rate. KDI estimated that job matching efficiency has improved by about 11% over the past decade. This means that, assuming the number of job seekers and job postings is the same, the number of new hires increased from 100 to 111.

This improvement is attributed to the proliferation of online recruitment platforms, the adoption of AI recommendation systems, and the activation of job placement services, which have enhanced access to information and the accuracy of job matching. In fact, the proportion of job seekers using public and private job placement agencies more than doubled from 32% in 2015 to 71% in 2025.

In conclusion, KDI pointed out that more than 68% of the decline in the unemployment rate over the past decade is attributable to structural changes in the labor market. In particular, the core of these changes is the exit of young people from the labor market, and if this trend becomes entrenched, it could lead to reduced utilization of human resources and issues with social integration. KDI advised, "It is necessary to maintain willingness to participate in the labor market and to expand the availability of quality jobs."