[Kangkook Lee's Column] The Despair of Korean Youth Struggling to Find Employment… Reforming the 'Dual Structure of Large and Small Enterprises' is the Solution

Dr. Kangkook Lee is Professor of College of Economics at Ritsumeikan University in Japan and Affiliated Research Fellow at CUKPE

I visited Korea for the summer vacation. I met up with friends and seniors for the first time in a while and we discussed economic and political issues between Korea and Japan. Everyone agreed that Korea's economic growth rate is much higher, so the gap with Japan will likely widen further for the time being. However, along with this, the inevitable question that comes up is whether Japanese youth aren't in a better situation than Koreans because they can find jobs easily. One friend sighed, mentioning that their child, a senior in college, is struggling with worries about employment.

Korean youth who find it difficult to find jobs

The reality that it is difficult for children to find employment even after graduating from a prestigious university in Seoul is vastly different from that of our generation as parents. Nowadays, open recruitment by large corporations like in the past has disappeared, and companies are all trying to hire experienced professionals; but isn't experience something that cannot be built in the first place if one cannot get a job? It is therefore understandable that young people fall into despair while searching for employment. I have even heard that internships nowadays require experience, and that personal networks, such as a father's referral, are crucial when securing an internship.

According to the figures, as of 2024, there were 634,904 graduates from South Korean higher education institutions and 377,120 employed. The employment rate for university graduates, calculated by using the number of eligible graduates as the denominator (excluding those pursuing further education, those unable to find employment, and international students), was 69.5%, with the rate for graduates of general four-year universities standing at 62.8%. The overall employment rate has risen slightly compared to a few years ago. Of course, there is likely some inflated data, and it would be difficult to claim that an average of 7 out of 10 university graduates succeed in finding employment. Based on data from the University Information Disclosure System (Daehak Alimi), when calculating with the total number of graduates as the denominator, 169,214 out of 314,622 graduates from 193 four-year universities in 2025 were employed, resulting in an employment rate of 53.8%. This figure is lower than in 2023 (58.1%) and 2024 (55.7%).

Media reports are overflowing with news regarding the employment difficulties faced by young people. In the second quarter of 2026, the number of unemployed university graduates in their 20s and 30s reached 309,000, marking an increase of 7,000 for those in their 20s and 27,000 for those in their 30s compared to the previous year. Notably, the number of unemployed individuals in their 20s with no prior work experience was recorded at 48,000, an increase of 11,000 from the previous year. According to employment trends, as of July 2026, the employment rate for the youth aged 15 to 29 stood at 44.2%, marking a decline for 27 consecutive months, while the youth unemployment rate rose to 6.8%, higher than last year. Among the youth population, the number of people classified as "taking a break" was 367,000, accounting for 4.7% of the total. Nevertheless, the youth unemployment rate is lower than the 9.8% recorded in 2017, and the proportion of those "taking a break" has also decreased compared to last year.

Above all, competition is fierce for desirable jobs in large corporations and the public sector, which are preferred by young people, due to a shortage of supply compared to demand. While the number of graduates from higher education institutions is projected to reach 630,000 in 2025, the 113 major corporations that announced hiring figures for that year planned to hire approximately 92,700 new employees. Of these, the proportion of new hires aged 30 or younger was merely half. Furthermore, according to announcements from the Blue House, the top 10 major conglomerates hired approximately 49,000 new employees in 2025 and plan to hire 51,600 in 2026. However, experienced professionals accounted for about one-third of these hires, while the plan for entry-level positions was 34,200. Additionally, in 2025, 28,825 national civil servants, 17,665 local civil servants, and 27,000 public institutions were newly hired. This indicates that the number of new hires in large corporations and the public sector falls significantly short of the number of university graduates.

Ultimately, the youth unemployment problem stems not from the jobs themselves, but from a shortage of the "good" jobs they desire. While small and medium-sized enterprises (SMEs), which account for approximately 80% of all jobs in Korea, are likely to hire a significant number of new employees, young people are unlikely to readily apply to them due to poor working conditions and low wages, as they are forced to lower their expectations. Just looking at wages, the gap between large corporations and SMEs is vast, and isn't the reality that once you start working at an SME, it is extremely difficult to move to a large corporation later? According to the Survey on Working Conditions by Employment Type, wages at SMEs with fewer than 300 employees were projected to reach approximately 57% of those at large corporations by 2025. Therefore, it is understandable that many university students postpone graduation or employment until they find a decent job.

Is Japan really a job paradise?

What about Japan? According to the Japanese Ministry of Health, Labour and Welfare, the employment rate for university graduates is projected to reach 98% by 2026. However, it is important to note that the denominator of this figure is the number of job seekers. Among all university graduates, the employment desire rate—excluding those pursuing further education or household duties—was 75.6%. Therefore, the actual employment rate relative to the total number of graduates is approximately 74%, which is still about 20 percentage points higher than that of graduates from four-year universities in Korea. Interestingly, regardless of major, the employment rate for job seekers in both liberal arts and science fields stood at around 98%. Of course, this result has limitations as it is based on a small sample survey; however, other data shows similar trends, and in reality, it appears that finding employment is much easier for Japanese university students than for those in Korea. In fact, Japanese university students begin the job application process at the beginning of their third year, and by the beginning of their fourth year, before graduation, a significant number have already secured employment.

The reason for the high employment rate of university graduates in Japan is that companies are facing labor shortages. Japan experienced a decline in birth rates and an aging population about 20 years earlier than Korea, and the continuous decrease in the number of university students has improved the conditions for job seekers. Many university students are accepted by multiple companies and choose which one to join. Recently, to retain new employees, companies have even been confirming their children's employment with the parents of students they have decided to hire; this practice is called "Oyakaku ." This must be surprising to Korean parents, who are deeply concerned about their children's employment prospects.

The high employment rate is related to demographic changes as well as the reality that the Japanese economy has recovered somewhat since "Abenomics." During the 1990s and early 2000s, often referred to as the "employment ice age," the employment rate for university graduates in Japan was quite low, leading to reports that this generation has relatively low incomes even after finding employment. Ultimately, while the youth population has shrunk significantly, the slight economic recovery has made it easier for university graduates to find jobs. Currently in Japan, the effective job opening ratio—which indicates the number of jobs per job seeker—reaches 1.18, while the new job opening ratio stands at 2.16. In contrast, Korea's job opening ratio is 0.46 as of August 2026, which is significantly lower than Japan's.

Just like in Korea, Japan has a much larger number of jobs in small and medium-sized enterprises (SMEs); however, a significant difference is that university graduates readily take jobs at SMEs. This is likely due primarily to the small wage gap between large corporations and SMEs. While large corporations certainly offer better conditions than SMEs in terms of pensions and other benefits after retirement, the wage gap is at least not as large as it is in Korea. Consequently, there is a prevailing trend among university students to choose employment at SMEs near their hometowns rather than large corporations in Tokyo, where the cost of living is high. Another major difference from the Korean labor market is that, regardless of the company, most employees can work stably until over the age of 65 without quitting midway.

The figure below shows the gender-based wage gap between large corporations (over 1,000 employees) and medium-sized enterprises (100–999 employees) and small enterprises (10–99 employees) in Japan in 2025. Even for those in their late 50s, when wages are highest, the wages of medium-sized enterprises are only about 81% of those of large corporations, and those of small enterprises are about 72%. The gap is much smaller for those in their 20s and 30s. Of course, it is important to note that this survey targets only companies with 10 or more employees, which differs from the survey in Korea, where the employee size is surveyed more broadly. Nevertheless, the fact that the wage gap in Japan is so small appears to reflect the differences in that there are more robust small and medium-sized enterprises than in Korea, and the relationship between large and small businesses is somewhat more cooperative.

On the other hand, this is also related to the reality that salaries at Japanese companies, particularly large corporations, are relatively lower than those in Korea. The starting salary for new employees at representative Japanese conglomerates like Toyota and Sony is approximately 4 million yen (about 34.86 million KRW) based on base pay. Perhaps due to the ease of finding employment, the number of Korean students studying abroad in undergraduate programs at Japanese universities has increased significantly recently; however, they may be disappointed once they join a Japanese company because the salaries are too low. Such low wages across society can be considered a serious problem for the Japanese economy. During the 30-year long-term recession following the collapse of the bubble economy, real wages in Japan remained stagnant, and while the profits of large corporations increased significantly after Abenomics, wages did not rise. However, following the return of inflation, nominal wage growth rates in the Spring Labor Conference have risen sharply over the past three years, and real wages have also been increasing this year.

The dual structure of the labor market must be improved.

As Korea's youth population is currently declining rapidly, the issue of youth employment may improve over time. However, the recent rapid advancement of artificial intelligence (AI) technology is dealing another blow to new hiring among the youth. Several studies report that in industries highly exposed to AI, jobs for young workers decreased significantly following the launch of ChatGPT in late 2022, while jobs for skilled workers in their 50s actually increased. This is because basic tasks handled by entry-level workers, such as data collection and document creation, can be easily replaced by AI. The situation is no different in Korea . As companies are reluctant to hire entry-level employees due to the advancement of AI, young people have found themselves in a position where they must compete with technology itself.

In response to the serious youth unemployment problem, the government announced the " Youth Job Recovery Plan " on August 28. It decided to cultivate over 300,000 skilled professionals in high-tech industries such as artificial intelligence and semiconductors, as well as fields preferred by young people, and to establish a matching platform to connect youth with companies. Furthermore, it expanded youth employment support and job search allowances, assisted with career growth and asset formation after employment, and increased support for companies that hire young people. In the 2027 budget proposal, the budget for youth jobs was set at 3.3 trillion won, an increase from 2.6 trillion won in 2026.

While these policies are significant, it remains to be seen how effective they will be. Along with this, it would be beneficial for young people if the government directly created public sector jobs, which are relatively fewer than in other developed nations, or implemented industrial policies focused on job creation. Furthermore, measures such as establishing industry-specific vocational training funds—as seen in France—and imposing contributions on large corporations that hire only experienced professionals instead of new hires could also be considered.

However, as evidenced by the comparison with Japan, efforts to narrow the gap between large corporations and small and medium-sized enterprises (SMEs) are also necessary to resolve the youth unemployment issue. Since wage disparities based on company size are largely attributed to productivity gaps, the government must focus its efforts on supporting productivity growth and management improvements in SMEs. Furthermore, it is necessary to regulate unfair trade practices between prime contractors and subcontracting SMEs, strengthen the system linking supply payments, and promote the institutionalization of a mutual cooperation fund. Above all, efforts are needed to strengthen the bargaining power of workers in subcontracting SMEs. For instance, it would be desirable to establish minimum wage levels by industry through sector-wide collective bargaining or to facilitate negotiations between prime contractors and their partner companies.

Although the Korean economy has entered a boom this year with a growth rate exceeding 3%, the difficulties faced by young people struggling to find jobs appear to persist. If their despair deepens, the generational gap and social conflict will intensify. To overcome this, efforts to break down the dual structure of the labor market are required.

(This article was originally published as a column in Hankyoreh in Korean and translated into English with the help of Google Translate. The views expressed in this article are those of the author(s) and do not necessarily represent the official stance of the center.)