Let SMEs create quality jobs for the young

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Let SMEs create quality jobs for the young

Published: 24 Nov. 2024, 20:07

Sohn Hae-yong
The author is the business news editor of the JoongAng Ilbo.

Korea Zinc, Samchully, Dongsuh Foods and Poongsan may not be in the big corporate league, but they are must-include candidates for first-job bidders. As employers, they stand as formidable as big names, thanks to their respectable work conditions and job security. Their business reports are testaments of this. As of the end of 2022, employees of Korea Zinc worked an average 12 years and eight months, earning 102.49 million won ($72,895) while those of energy-focused Samchully worked 16 years and four months with average salary of 95 million won and those of metal refiner Poongsan worked 17 years and six months earning an average 83 million. Due to the impressive record, they are considered “undiscovered gems” for job aspirants.

Job mismatch is the primary cause for youth unemployment. Experts generally point to the industrial structure deficient of workplaces offering pay and working conditions that meet the needs of today’s young people. Korean SMEs struggle with labor shortage, but they are shunned by young people due to the yawning discrepancies in compensations compared with big companies. The young who cannot land a job in large companies are categorized as idled or NEET — not in employment, education or training. Much of the problem can be solved if more smaller companies provide sound pay, security and growth prospects as the four names above.

Korea’s youth joblessness is a serious affair. The unemployment rate of those aged between 15 and 29 was 5.5 percent last month, twice bigger than the across-the-age average of 2.3 percent. Those who are “just resting” — neither working nor looking for work — surged to 418,000 last month. In 2018, this population was numbered at around 200,000. In spite of the decline of young people due to a dismal birthrate and population aging, the number of young people without jobs is increasing. The fact that those who have given up finding jobs take up 5 percent of the youth spells disaster for the Korean economy’s future.

Some scorn the young for being picky about the type of work and workplaces available. But they cannot be blamed when the salary gap between big companies and SMEs is 1.6 times for people in their 20s, 1.9 times for 30s, 2.2 times for 40s and 2.4 times for 50s. The longer they work, the wider the discrepancy in their earnings. Young people naturally would wish to start their career stably as their entire future — family making, homeownership, child education and senior comforts — depend on their first choices.

The number 9988 represents the structural problems of the Korean industry. SMEs account for 99 percent of Korea’s corporate demographics and 88 percent of jobs. The Korean industry is gourd-shaped with a select few big companies making up the small top while SMEs bulge at the bottom.

Because the gourd mouth is tiny, getting into the top can be strenuous. But the fat bottom does not live up to young jobseekers’ expectations, which explains the structural mismatch in the labor market.

The structure must be molded to look like a jar. The middle must fatten with competitive SMEs and unicorn ventures. If there are more SMEs like the aforementioned four that offer decent pay, welfare benefits and a good work environment, they will win over young talents. The strength of SMEs can reinvigorate the sagging growth engine of the Korean economy. A study projected that Korea’s growth potential rate could be raised by 0.7 to 1 percentage points annually if the productivity of SMEs and the services industry are elevated to the OECD average levels.

The stifling regulations must be removed to cultivate a business-friendly environment. SMEs should be allowed to avoid the Peter Pan syndrome, or the dread of becoming bigger due to the burden of extra regulations and supervision. The government needs to come up with policies and a budget to help SMEs increase hiring of young people, advance to overseas markets and enhance research and development (R&D) activities. The hierarchy between big companies and SMEs must be redressed to make more room for innovative SMEs.

Youth joblessness must not be taken lightly as it feeds an economic slump. If the labor mismatch is not corrected, the dual industrial structure as well as job insecurity and labor shortage will perpetuate a slow-motion economy.

If the younger population, who makes up future human capital, are not fully utilized, the toll will fall on the economy’s productivity. The answer lies in the strength of SMEs to create jobs for the young and reinvigorate the economy. It will be more practical and cost-efficient to raise the standards of current players instead of pouring astronomical amounts of money into new industries.

Translation by the Korea JoongAng Daily staff.