Quality of Youth Jobs Worsens Amid AI Expansion

As the spread of AI weighs on youth employment, the quality of jobs for young people has been found to be deteriorating. This year, the youth unemployment rate stands at 6.6 percent and the employment rate at 43.7 percent, numerically improved from a decade ago. But as stagnation in the labor market drags on, there is a clear trend of young people taking lower-quality positions instead of the jobs they want. In fact, the share of temporary and day laborers among employed youth rose from 30.7 percent in 2022 to 33 percent last year. While the quantity of youth jobs has grown, their quality has declined.

In the past, young people remained unemployed until they landed the job they wanted, but with the prolonged labor market slowdown, many are now lowering their expectations to secure employment. The Bank of Korea's 'employment quality' index, which quantifies factors such as contract length and job stability, points in the same direction. Measured against a long-term average of 100, the only group that has fallen below 95 over the past three years is the youth demographic.

Youth employment is contracting further as AI replaces the tasks of entry-level employees across various fields. The market's restructuring toward IT-centered industries, which has weakened job creation, is also cited as a factor. While IT manufacturing, including semiconductors, drives economic growth, it fails to generate many stable jobs. In fact, IT manufacturing accounts for a mere 2 percent of regular-position hiring.

The lack of flexibility in the labor market is also cited as a problem. The current structure makes it difficult for those who lose their jobs to move back into better positions. The proportion of young workers who moved from small and medium-sized enterprises or temporary jobs to large corporations fell from around 8 percent before the COVID-19 outbreak to 5 percent recently.

The Bank of Korea diagnosed that if this trend becomes entrenched, improvements in youth employment could be delayed even when the economy recovers. It also suggested that, beyond job policies, improvements in industrial structure and labor market structure are needed.