and Youth Job Promotion Strategy. Jaeryang Nam (Korea ..... into one based on jobs,. (2) establishing a recruitment syst
The Causes of the Recent Stagnant Employment Rate Growth and Youth Job Promotion Strategy
Jaeryang Nam (Korea Labor Institute) 2012. 7. 4
Ⅰ. Purpose of the study
○ Identify the cause of stagnant employment rate growth during the past 10 years and
○ Provide policy directions on youth employment for boosting the employment rate
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Ⅱ. Recent stagnant employment rate growth and youth employment rate
○ Employment rate trends and youth employment rate - Employment rates also began to rise as the economy recovered after the Asian Currency Crisis, but continues to remain below the 60% after reaching 60.0% in 2002. - One likely factor behind this is the drop in the youth employment rate - As shown in Figure 1, youth employment rate remained stagnant for a while since 2002, then began to plummet in 2006, reaching 40.4% in 2012. - Accordingly, the youth employment/overall employment ratio (right side coordinates in Figure 1) shows a dramatic decline since 2006, recording only 0.68 in 2012.
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○ When excluding both youths and non-youths to measure the influence of the youth employment rate on the overall employment rate, - The employment rate for ages 30 and above and excluding the 15-29 age bracket recorded 65.0% in 2012. (59.4% for the entire population ages 15 and above, including youths) - When limiting the age to 64 years as typically done in international comparisons, the ages 30-64 employment rate not only jumps to 72.9% in 2012, it displays continuous growth, with the exception of during the 2009 recession. - This contrasts with sharp decline in the youth employment rate since 2006 - In conclusion, the stagnation of the overall employment rate is likely to be linked to the drop in youth employment, and the influence of the youth employment rate on the overall employment rate is also likely to be significantly strong. 3
Overall employment rate, youth employment rate, and employment rate ratio 65.0
0.780
60.0
0.760
55.0
overall
0.740
youth(15-29)
50.0
youth / overall
0.720
45.0 0.700 40.0 0.680
35.0
30.0
0.660 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Refer to the right-side coordinates for employment ratios (youth/overall)
Refer to the right-side coordinates for ages 15-29
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Ⅲ. Decomposition of the employment rate
○ We will now assess the influence of youth employment on the overall employment rate by applying a more strict methodology
- in other words, we will determine whether the employment rate stagnation was caused by youths
- by decomposing the changes in the overall employment rate into those caused by youths and those caused by the remaining population.
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1. Employment rate: Definition
○ Employment rate is defined as the percentage of people who are employed among the total working age population above the age of 15, - And this is equal to the sum of the employment rates for each individual age brackets weighted based on their proportion within the total working age population. ○ Employment Rate (e) = Number of Employed (E) / Population (P) = Weighted sum of employment rates for each age bracket (
),
However, In other words,
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2. Decomposition of the employment rate
○ The change in employment rate between two different dates can be decomposed through the following formula.
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3. Results ○ Table 1 shows the results of decomposition of the changes in the employment rate into those caused by youths and those caused by the remaining workers ages 30 and above based on the above methodology.
Results of decomposition of changes in the employment rate Weighted employment rate
Population proportion
Employment rate
Overall employ ment rate
Youths
Ages 30 and abo ve
Youths
Ages 30 and abo ve
Youths
Ages 30 and abo ve
2002
60.0
13.0
47.0
0.288
0.712
45.1
66.0
2012
59.4
9.2
50.1
0.229
0.771
40.4
65.0
-0.62
-3.74
3.12
-0.06
0.06
-4.7
-1.0
Change (2012-2002)
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4. Interpretation
○ The employment rate stagnation during the past 10 years was caused by the decline in the weighted youth employment rate
- Had there been no change in the weighted youth employment rate, the overall employment rate would have increased by 3.12 points, which is the increase in the weighted employment rate for workers aged 30 and above. - But because the weighted youth employment rate fell by 3.74 points, - the overall employment fell by 0.62 (=3.123.74) points. - In conclusion, the employment rate stagnation during the past 10 years was caused by the decline in the weighted youth employment rate
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Ⅳ. Cause of the youth employment rate decline
○ If the drop in the youth employment rate is the main cause of the drop in the overall employment rate, it will be possible to provide a meaningful policy prescription only after identifying the cause of the drop in the youth employment rate.
1. Employment rates for individual age brackets within the youth age group
○ Employment rate trends by individual age bracket
- The youth age group was further classified into five age brackets based on 5-year age differences
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- While the ages 15-19 bracket generally displays a downward trend in terms of employment rate, it also shows a gradual recovery after 2009. - The case of the ages 25-29 bracket, unlike the youth age group as a whole, displays a continuous increase in the employment rate, with the exception of 2009. - The increase in the employment rate for this age bracket is worthy of note as it is most closely related to the age group of college graduates fresh out of school and is also the most important target age group for government policies. - On the other hand, the employment rate for the ages 20-24 bracket continues to decline. It continues to decline during the period between 2002 and 2011, recovering only slightly in 2012.
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Employment rate by individual youth age bracket 60.0
70.0
50.0
69.0
40.0
68.0
30.0
67.0
15-19
20.0
20-24
66.0
25-29 10.0
65.0
0.0
64.0 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Refer to the right side coordinates for the employment rate for ages 25-29
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○ The decline in the youth employment rate is mostly caused by the decline in the employment rate for youths aged 20-24. - The ages 25-29 employment rate increased, while the ages 15-19 employment is recovering after falling moderately. - Since the ages 20-24 bracket is closely related to university enrollment, the drop in employment rate for this age bracket can be explained in relation to university enrollment.
2. University enrollment rate and early 20s employment rate trends ○ Cause of the drop in employment rate for ages 20-24 - Mainly due to the increase in university enrollment rate
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○ Changes in the university enrollment rate - As it is well known, Korea's university enrollment rate has displayed continued and rapid increase. - The university enrollment rate, which began to rise since the early 1990s, has continuously increased, never dropping once, until reaching 83.3% in 2008. - While the university enrollment rate continues to fall since then up until 2012, its increase by 50.1% points over less than 20 years, from 33.2% in 1991 up until 2008, inevitably affects the labor market.
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2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
60.0
1988
70.0
1987
1986
1985
1984
1983
1982
University enrollment rate trends 90.0
80.0 total
junior college
4-year university
50.0
40.0
30.0
20.0
10.0
0.0
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○ Changes in the employment rate and university enrollment rate - The recent sudden changes in the youth employment rate is represented by the steep decline since 2005. - Such decline in the youth employment rate is closely related to the ages 20-24 bracket who form the main age group which goes on to college. - The employment rate for the ages 20-24 bracket continued to drop since 2002, declining steeping after 2005. - By converting the university enrollment trend into a diagram, it is possible to better identify periods during which there were major changes. - As shown in , the university enrollment rate begins to display positive growth starting 1991, and experiencing a spike in 1994. - After that period, the growth of the university enrollment rate continues to decline until 2000. 17
- However, it increase again from 2001 to 2003, and with the exception of 2006, continues to display positive growth until 2008, after which it begins to fall. - One point worthy of note is the surge in the university enrollment rate between 2001 and 2003. The resulting increase in the number of students and following increase in the number of students on leave and graduates pulls down the employment rate for the ages 20-24 bracket. It may also act as a key factor that hinders the growth of the youth employment rate. - In reality, as shown in , the number and ratio of students on leave have increased during this period - From this aspect, it is possible to deduce that the drop in the employment rate for youths, particularly those aged 20-24, was caused by the increase in the university enrollment rate.
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2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
University enrollment rate trend 8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
-8.0
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Number and ratio of students on leave 36.0
1,000,000
Number of students on leave Percentage of students on leave
(%)
(명)
900,000
34.0
800,000 32.0 700,000 30.0
600,000
28.0
500,000
400,000
26.0
300,000 24.0 200,000 22.0
100,000
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
0 1990
20.0
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○ The youth employment rate decline is closely related to the increase of the economically inactive youth population and youth NEETs. - In reality, the economically inactive youth population ratio (economically inactive youth population/youth population) continues to increase since 2004, in contrast to the economically inactive population ratio for ages 30 and above. - The number of youth NEETs, particularly youth NEETS who are not engaged in job seeking, are also on the rise. (1,033 thousand people as of 2012)
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Economically inactive population rate 60.0
55.0
50.0 30+ 45.0 15-29
40.0
35.0
30.0 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
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Ⅴ. Policy directions for boosting the employment rate
○ Since the cause of the recent employment rate stagnation lies in youths, appropriate policy measures that target youths are required in order to boost the overall employment rate
1. Long-term measures ○ Realization of a competency-based society - The continuous increase in the university enrollment rate despite the growth in the number of unemployed youths such as NEETs is one evidence that Korean society is places more emphasis on academic background rather than competency.
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- Therefore, the most fundamental and important policy direction is to realize in the mid and long-term a competency-based society in which people are treated and not discriminated based on their competencies. - Fortunately, "open recruitment" is emerging and university enrollment continues to fall for four consecutive years. - This is likely the result of people's realization that the life time benefits from enrolling in college does not cover the life time costs. - The Ministry of Employment of Labor should match this change by continuously pursuing high school specialization policies and providing assistance to improve their results. - Through its recent ‘Roadmap for 70% Employment Rate', the government seeks to realize a competency-based society and boost youth employment by 24
(1) transforming the vocational training system into one based on jobs, (2) establishing a recruitment system which screens youths based on passion and potential rather than academic background, (3) introducing a Korean-style work-learning dual system, and (4) enhancing universities' function of work-learning connection.
2. Mid-term measures
○ University specialization policy
- While preemptive measures to prevent youths from suffering the harmful consequences of excessively high education levels are important, measures to assist people who have already enrolled or graduated from
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college are experiencing difficulty finding jobs. - It is important for the Ministry of Employment and Labor to first drastically expand the university specialization policies for incumbent university students, and then search and assume roles it can provide. - Since unemployed university graduates have failed to successfully enter the labor market, policy efforts to prevent their human resources from deteriorating and to encourage them to seek employment at small and medium-sized enterprises are also important. - The ‘strengthening of the work-learning connection function of universities’, for which the government has established a roadmap and is pushing forward with, does have its similarities with the early stages of university specialization, but is still far from university specialization itself.
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3. Short-term measures ○ Need for specific and continuous efforts to facilitate "Open recruitment" ○ Discrimination based on level of education is also a problem that is widely pointed out. - Many people acknowledge that such discrimination is a very serious and important issue in Korean society. - If there is discrimination due to differences in level of education rather than academic ability, the issue should be thoroughly analyzed and efforts should be made to abolish such discrimination. - However, it is wrong to regard all gaps occurring from differing education levels as discrimination when the analysis has yet to be performed.
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- This is because policies based on an inaccurate perception are unlikely to yield successful results. ○ Improving HR management - Managing high school graduates well after they are hired is also important. - It is important to maintain salary differences between high school and university graduate employees at a rational level. - Also, there must be no discriminating factors in areas of HRM such as training and education, promotion, and welfare. - Moreover, it will be necessary to establish career development plans for high school graduate employees to build an environment in which they can work with long-term vision. - Such improvement of the environment will also contribute to lowering the turnover rate of high school graduates, which is higher than that of university graduates.
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○ Improving company's avoidance of hiring high school graduates due to military service issues - This is also an important issue. - There have already been numerous observations that high school graduate recruitment is centered around females who are free from mandatory military service. - While there have been news reports this year on companies' plans to hire male high school graduates, the requirement to fulfill military service hinders the recruitment of male high school graduates. - It is necessary to devise measures that lessen the burden of male high school graduates by enabling a school-workplace-military link in which they learning, working, and serving are all connected.
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- Measures to connect what men learn at vocational high schools as well as the duties they perform in the military with the areas that they work on at the companies have been proposed, but more elaboration is required. ○ Vocational high school graduate demand-supply issue - While based on a fragmentary survey, there have been newspaper articles claiming that over 40% of companies have demand for high school graduates. - However, despite that recruitment of high school graduates is centered around vocational high schools, there is a possibility that the supply of vocational high school graduates may not meet the demand. - A report on the future demand-supply trends for vocational high school graduates speculated that by 2018, the supply of graduates will not be enough to meet the demand.
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○ Post high school vocational training system - The existence of a vocational training system that allows high school graduates to evolve into more productive human resources will also play a key role in maintaining this trend.
○ Efforts to resolve the job mismatch problem - In order to solve the labor shortage issues suffered by small and medium-sized enterprises and to provide opportunities to the over one million youth NEETs, efforts should be made to fundamentally solve the chronic job mismatch problem.
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○ It is true that the government is showing efforts to establish effective policies in its roadmap. - However, we should search for more fundamental reasons why previous measures to resolve the job mismatch failed to yield notable results, - and exert efforts to further enhance the effectiveness of the policies.
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Ⅵ. Conclusion
○ The increase in recruitment of high-school graduates is an important change, but it is not clear whether this has become a trend. - The recent phenomenon of increased recruitment of high-school graduates is an important change in the recruitment market, but it is not clear enough to be identified as a trend. - However, since the change in the environment has already created a new trend of decreasing university enrollment rates, this change in the recruitment market is also likely to settle as trend. ○ The results may differ depending on the level of effort. - If we exert proactive efforts to overcome the anticipated problems, - while also exerting effort to resolve newly emerging problems, 33
- the recent phenomenon of increased recruitment of high-school graduates can become a major trend within the labor market. - Whether or not we will be able to lead the recent hard-earned opportunity into Korea's transformation into a competency-based society depends on how much effort we exert. ○ While the ‘Roadmap for 70% Employment Rate' proposed by the government includes information on most of the effort that we should make, - it will be necessary for us to constantly monitor our level of action, - and to exert continuous effort towards additional considerations and improving areas that require remedy.
