Unemployment rate hurts people with decent jobs

Bank of Korea in central Seoul. [YONHAP]

Problems on the employment front, made worse by the coronavirus pandemic, may have ripple effect for as long as four years -- even for college graduates lucky enough to get jobs, according to a Bank of Korea (BOK) report on Monday.

The report used data from the Korea Labor & Income Panel Study provided by the Korea Labor Institute to track college graduates' incomes over 22 years from 1998 through 2019.

On analyzing data, the central bank found increases in a country's unemployment rate affected incomes of college graduates even if they managed to land jobs. This means that when the job market deteriorates, college graduates earned less than they might have in good job market conditions.

The BOK report showed that when a country's unemployment rate increased by 1 percentage point, college graduates who graduated and landed jobs in that year earned 4.3 percent less compared to the average annual earnings of college graduates over the past 22 years.

For example, if college graduates usually earned an average of 36 million won ($32,000) as their starting wage, when the unemployment rate grew by 1 percentage point, that figure would be reduced by 1.55 million won.

In the third and fourth years of work, the affected college graduates earned 2.3 percent less than average, showing that a bad labor market affects their wages for as long as four years.

From the fifth year, the link between a high unemployment rate and college graduates' earnings weakened to the point it was meaningless, according to the report.

Oh Sam-il, a senior economist on the central bank's labor market research team, explained that the major reason behind the wage decline is a decline in the quality of the jobs landed by college graduates.

"We consider college graduates found a matching job if they found jobs that require a college diploma," Oh said. "Jobs in services, farming, fishing, and simple labor work are considered jobs that don't require college diplomas."

In the short term, choosing non-professional or part-time jobs would mean smaller-than-expected wage for college graduates, and in the long-term it could negatively affect their career development.

When broken down by college ranks, graduates from the top 30 colleges in the country were not much affected by the bad economic situation in terms of how much they earn after finding jobs, while graduates from all other colleges including two-year junior colleges were affected.

An increase in the unemployment rate also reduced chances for college graduates landing jobs at large companies, defined in the central bank report as companies with 200 or more employees.

The report said that when the country's unemployment rate grows by 1 percentage point, chances of college graduates landing a job within a year at large corporations shrank by 3.5 percentage points.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]