On
Monday, December 16th
2013, The Korea Herald
published an editorial
about the country’s state of youth unemployment.
According
to the editorial, although statistical
studies seem to show that Korea’s labor market conditions are
improving (the
country’s overall unemployment rate has decreased by 0.1 percentage point to 2.7 percent),
the
unemployment rate for those aged from 15 to 29 increased by 0.8
percentage points from a year earlier, hitting 7.5 percent in
November.
The
total number of young people who are unemployed could very well be
higher as official unemployment figures do not count discouraged
workers.
Ironically,
this increase in the number of unemployed young people is contrasted
by the fact that many small and medium-sized enterprises (SMEs)
suffer from a chronic shortage of workers.
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| Source: http://farm3.staticflickr.com/2724/5863884809_7dcbcea2e5_z.jpg |
To
be sure, there are certainly structural problems in the Korean
economy that has exacerbated Korea’s high level of youth
unemployment. One of the main culprits behind it is the
supply-demand mismatch in the labor market. In other words, there
are far too many young people who are far too highly educated for
jobs that do not exist for them.
Case
in point, about 33.2 percent of Korea’s youth were
college-educated in 1990. In 2008, 83.8 percent of Korea’s youth
were college-educated.
Compounding
the issue is the increasing
rate of the minimum wage, which makes employers less likely to
employ young people with little to no experience and prefer those who
are older with previous work experience, and unionization that
protects older workers from having to compete for their jobs with
younger aspirants.
There
are certainly things that the government can do to alleviate the
youth unemployment rate such as reversing course on its minimum wage
policy and making it easier for employers to fire striking workers.
Furthermore, the government can try to adopt and tinker with other
successful policies such as Germany’s
apprenticeship system, which helps to ease young people’s entry
into the job market by lowering business’ costs for employing them,
while successfully avoiding the currently practiced internship
system, which essentially compels younger people to perform menial
tasks that usually have little to do with the actual jobs that they
are interning for while usually not getting paid in the name of
gaining (dubious) experience.
However,
those are only attempts at trying to solve the problem’s symptoms
rather than its causes.
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| Source: http://mdhealing.com/wp-content/uploads/2012/01/Iceberg.bmp |
One
of the underlying roots that plague Korean society, not unlike other
countries with advanced economies, is that there is a dangerous
disconnect between the demand for blue-collar work, the kind of work
that does not necessarily require a college degree, and the number of people who are willing to fill these positions. This is the
result of the Korean people’s tendency to demonize such kinds of
work.
The
fact of the matter is that, as mentioned earlier, SMEs
do suffer from a chronic shortage of workers, particularly for
blue-collar
jobs. Due to the kinds of higher education that people prefer
(with a tendency to prefer service-based jobs in chaebol
companies) and their avoidance of other skill sets, such as welding
or farming, this near nation-wide behavior has resulted in a skill
gap; meaning that there are jobs that cannot be filled by Koreans.
It
is a self-inflicted injury. In their desire to save face or conform
to society’s collectively held image of what a successful person
ought to look like, parents either force and/or socialize their
children into going to college. And when they do go to college, they
usually do so by taking out student loans that these future graduates
might not be able to repay when/if they fail to get the jobs that
they were promised but turned out did not actually exist. And this
is the problem.
This
is certainly not to say that it is undesirable to have an educated
youth. It is certainly preferable to have an educated population to
one that isn’t. However, when the motivation behind the desire to
get a college education is in order to be eligible for “better”
jobs rather than simply to attain higher education, then there is a
problem.
In
the field of economics, there is a type of good that is known as a
Giffen good.
The law of demand states that when the price of a good increases, the
demand for the good then correspondingly decreases as people begin to
seek other alternatives or substitutes. A Giffen good is a good that
defies the law of demand because it is a type of good whose demand
continuously increases even when the price of the good continuously
increases. Economists have long argued with one another over the
question of whether or not Giffen goods actually exist. Though
higher education does not meet the exact requirements of a Giffen
good, it does appear to be the closest thing to a Giffen good out
there in the market.
The
existence of a Giffen good can only come through cultural norms.
There are, indeed, plenty of alternatives to a typical college
education (when it is being used as a diploma machine in order to be
used as resumes for jobs). One can pursue a technical education, or
as mentioned earlier, seek apprenticeships. Furthermore, considering
the fact that most jobs provide on-the-job training to their new
employees and the fact that only
a small fraction of college graduates ever get to work in a field
that is related to their major, and that most college graduates (for
one reason or another) cannot
seem to find work nowadays, it would appear that a college
education is a bane rather than a boon for young people. All of
these reasons suggest that, if this were a normal market, the demand
for college education ought to fall, and fall drastically. However,
there is no visible sign to suggest that that is about to happen any
time soon.
In
other words, this Giffen good, this non-dissipating demand for higher
education, is an aberration.
That
parents wish to see their children live better lives than the ones
that they had is certainly an understandable sentiment. In fact, it
could be argued that not wishing for that would a reprehensible
violation of one of the fundamental laws of nature. However,
parents, as well as the rest of society, are failing future
generations by imposing on them a myth – the myth that a college
education guarantees “better” jobs.
As
long as this myth remains unchallenged, neither Korea nor any other
country will be able to rid itself of the problem of high levels of
youth unemployment or the ever-increasing number of discouraged young
workers.
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| I hope they are ready to realize that they put themselves in serious debt to be overqualified for jobs that don't exist. Source: http://www.cba.csus.edu/biz/images/graduation_000.jpg |
