AI's spread structuralizes youth employment slump; income support for 'social contribution'

South Korea's youth unemployment is deepening into a structural problem, with the employment rate for those aged 15-29 falling 2.4 percentage points year-on-year to 43.8% in May. This marks the largest decline since January 2021, indicating a significant labor market shock. The number of young people who have left the workforce, categorized as "resting" (having the ability to work but not seeking employment), remains high, exceeding 400,000 in the first quarter for the fourth consecutive year.

“

With the slowdown in potential growth, the capacity to create quality jobs is limited, and labor market polarization is worsening, intensifying competition for regular employment.

Analysts attribute this persistent downturn to several factors. Companies increasingly prefer experienced hires, while the proliferation of artificial intelligence (AI) reduces the demand for new entry-level positions. This trend is particularly evident in sectors like professional, scientific, and technical services, where AI adoption is leading companies to hesitate in new recruitment. The slowing potential growth rate of the economy further limits the creation of high-quality jobs, exacerbating the polarization within the labor market.

“

As seen in the recent decline in employment in professional scientific and technical services, companies seem hesitant to hire new employees as they replace labor with artificial intelligence, which is likely a structural change.

In response, the government is exploring "participatory income" as a supplementary policy beyond traditional labor market initiatives. This concept, previously introduced by Lee Jae-myung as governor of Gyeonggi Province, would provide income support conditional on participation in social activities. Potential areas include caregiving and AI skills training, aiming to keep youth engaged and developing valuable skills during their job search.

“

As young people are unable to enter the labor market, human capital depreciates. Providing education and training and offering participatory income will have the effect of reducing this.

Economists like Woo Seok-jin of Myongji University believe this approach can help reduce the depreciation of human capital that occurs when young people are unable to enter the labor market. By providing education and training alongside income support, the policy could enhance their future employability. However, Suk Jae-eun of Hallym University emphasizes that the effectiveness hinges on the meaningfulness of the participation, suggesting it should align with the youth's future career prospects and vision.

“

The policy will be effective when the content of participation is genuinely meaningful for the youth's future employment and vision, not just for the sake of doing something to receive participatory income.