Start-ups and jobs for youth

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Start-ups and jobs for youth

The percentage of Korean households that consider themselves middle class in a Gallup survey dropped to 20.2 percent in 2013 from 75 percent in 1989. Gross domestic product has increased during that time, so that could be interpreted as a reflection of relative poverty. Yet the number of senior citizens who continue to work - either to support grown children or because they failed to prepare for retirement - also has increased.

Through all this, the employment rate of young Koreans and job creation is declining, and young people are competing against experienced middle-aged workers for existing jobs. The social burden of an aging population also pressures the young generation.

Having served as chairman of the Presidential Committee on Young Generation until last July, I had in-depth look at the youth unemployment problem. It is an undeniable reality that the employment situation for young people has deteriorated in both quality and quantity. From 2002-12, 1.03 million jobs for young workers were lost at a rate twice as fast as the decline in the young population. In the same period, the employment rate for young people shrank from 45 percent to 40 percent.

In terms of quality, jobs at large companies decreased more than at small and midsize companies, and the wage gap between large and small companies is widening. The percentage of irregular employment also has increased. The employment potential of Korea’s young generation is more than 1 million, including 410,000 who are preparing for employment, 370,000 who have given up on finding a job, and 350,000 who lost their jobs.

The problem of youth employment is aggravated by failing to fill jobs that already exist. The employment and reward system of our society is strictly based on academic background, and it incentivizes students to focus on school performance and qualifications rather than the talent needed by industry. And Korean society produces an excess of college graduates. While 70 percent of college graduates want to get a job at major companies or public corporations, there are only enough positions for one in 10 applicants. Young job seekers should look for other options, but they have a hard time lowering their expectations. Last year, small and midsize manufacturers suffered from a shortage of as many as 55,000 workers, proof that a labor shortage and unemployment exist at the same time.

The mismatch of jobseekers and available positions and academic inflation are caused by the emphasis on educational background and differentiated wages. In New York, plumbers make an average of 220 million won ($202,000) a year, more than plenty of college graduates. Miners in Australia make more than 100 million won, twice the average salary in the country. In Germany, workers at small and midsize companies make 85 to 90 percent of what large companies pay their employees. When small- and medium-sized businesses offer an agreeable compensation and work environment, young people take those jobs rather than preparing several years for employment at big companies.

Another cause of youth unemployment is a declining number of new jobs. As existing companies reduce new hires in the slow economy, graduates have fewer opportunities. Therefore, the creation of jobs through start-ups is increasingly important. In fact, start-ups of young entrepreneurs founded within five years that have fewer than 50 employees are the most active engine for job creation and economic vitality through new technology and products. From 2002-11, young companies led in the creation of new jobs, while existing companies in Organization for Economic Cooperation and Development (OECD) member countries decreased hiring every year. Nations around the world are making efforts to encourage entrepreneurship among young people.

Unfortunately, the youth start-up rate in Korea is the lowest among OECD members. Also, technology and idea-based start-ups that pursue high added value are relatively fewer, and the three-year survival rate of new companies is also lowest. If the current start-up environment persists, the next generation will not be able to escape the swamp of low growth and high unemployment. We need to work together to help young people display their full potential through start-ups, and to keep the economic growth engine going by improving the environment and enhancing the survival rate of new businesses.

Translation by the Korea JoongAng Daily staff.

JoongAng Ilbo, Feb. 3, Page B8

*The author is head of the Korea Venture Business Association and CEO of Dasan Networks.

by Nam Min-woo

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