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close this bookThe Transition of Youth from School to Work: Issues and Policies (IIEP, 2000, 188 p.)
close this folderChapter III. Transition from school to work in Korea: reforms to establish a new pathway structure across education and the labour market by Kioh Jeong
View the documentIntroduction
View the document1. Economic adjustment and youth in Korea
View the document2. Roles of institutions in school-to-work transition
View the document3. From school to work: business and industry involvement
View the document4. Ongoing education reform and implications for youth
View the document5. Conclusions: developing pathways

1. Economic adjustment and youth in Korea

1.1 Education and the labour market in Korea: general traits

In several ways, the concept of the segmented labour market generally suits the Korean labour market situation very well. At the risk of oversimplification, the labour market in Korea has been divided into two distinct sectors. One, the primary sector, is that of large-scale employers, both private and public. The other sector consists of services and manufacturing jobs in small and medium-sized enterprises (SMEs). The former has been characterized by a very stable structure of lifelong employment and relatively well-developed, on-the-job learning opportunities in the internal labour market. In the latter, the job turnover rate is usually high, and public labour market training serves only a small number of workers in this sector.

The secondary market covers two-thirds or more of total employment. Jobs in this sector, except for some established professions, show a very low degree of professionalization, as these markets do not usually draw on specialization. A National Scientific Office (NSO) survey in 1996 found that the mismatch between school majors and existing jobs is far higher with vocational high-school graduates than with university graduates. Junior college graduates statistics fit in between. The results of the survey imply that Korea still has a very big volume of poorly-skilled workers at the lower ladders of the national skill profile, where labour mobility inevitably tends to be high.

In the Korean education system, employment practices in both the public and private sectors have promoted a strong bias towards academic drift. During the seventies and eighties, the period of rapid economic growth, skilled workers were always in short supply. As a result, employers' main concern centred on maintaining an adequate supply of workers. They were ready to recruit workers despite their lack of initial qualifications, and then to train the workers only to the required minimum levels. In this context, schools and institutions usually tended to focus more on academic selection rather than skill formation. Preparation for work gradually became the responsibility of enterprises, individual students, and workers.

An important aspect of the employment practices of large employers is that they usually recruit young graduates who will serve the company faithfully until retirement. Due to closed organizational practices, work organizations do not usually recruit qualified candidates from outside for mid-level jobs within the hierarchy. Young people recruited by firms are expected, once working, to transfer from job to job; therefore, what matters is not the applicants' educational specialization, but rather the ability to do well whatever is asked of them. In the employers' opinion, therefore, the best criterion to select employees is their academic performance.

The employment practice outlined above has deep impact on the education system because people attach great importance to seeking jobs in large organizations. This practice results in the ranking of high schools and universities on the basis of students' academic records. As university rankings are established, top-rankers emerge. Employers then select top-ranking university graduates, irrespective of their majors. This tendency becomes more accentuated until the competition for entering top-ranking universities becomes so severe that it destroys the normal curricular activities in schools and other educational institutions. The scenario above is a typical one in Korea, as well as in Japan and in parts of China. Restrictive employment practices, combined with on-the-job skill development schemes, have tended to destroy vocational preparation in schools and institutions. With the passing of time, schools and institutions' skill formation functions have been greatly diminished.

As may be imagined, this phenomenon is possible only when the economy expands for a long enough time to allow firms to retain lifelong employment practices. This is primarily true of large employers; in the case of small businesses, the situation is completely different. However, the influence of labour markets on education is determined by the large firms, which are able to invest heavily in human resource development. Thus, small and medium-sized enterprises (SMEs) have suffered from a shortage of a qualified workforce resulting from the educational practices attuned to large employers' needs.

The foregoing story explains why vocational high schools have such a low status in Korea. In the period of economic expansion and labour shortages, vocational education, despite quantitative expansion, lost both attraction and value. For students, vocational education programmes became merely a forced choice when they failed under fierce competition for academic selection.

1.2 Economic contraction and the youth employment situation

As described above, the economic crisis of 1997 and the successive recession has brought about overarching change in the labour market. The current economic crisis has forced the Korean economy to hurry long-delayed structural adjustments. An employment survey released in September 1998 by the National Statistics Office (NSO), revealed some important aspects of the changes in the labour market hit by unprecedented unemployment between July 1997 and July 1998. Following is a summary of the changes from August 1997 to August 1998 (Office of Statistics Korea, 1998):

· the total labour force participation rate decreased from 62.9 per cent to 61.4 per cent; from 76.3 per cent to 76.0 per cent for male workers, from 50.2 to 47.6 per cent for female workers;

· the unemployment rate increased dramatically from 2.2 per cent to 7.6 percent;

· the percentage of self-employed workers remained stable, while employment decreased among salaried workers;

· the highest unemployment figures were recorded in the manufacturing and construction industries (three to six times higher than in other industries);

· unemployment was highest in the 15 to 19 and 20 to 29 age groups, three to six times higher than other age groups;

· the highest increase in unemployment was borne by craft-skilled workers, manual and operational job-seekers, and high-school graduate workers.

The above changes seem to reflect primarily the effects of the economic recession on the secondary labour market, for example, the construction sector, which suffered the greatest loss of jobs. At the time of the survey, employment adjustment in the public sector and big enterprises had not yet begun. As employment adjustment proceeds in the larger employer sector many workers are being made redundant again. Employment adjustment at this stage usually takes place in the form of lay-off and cutting extra work-hours as well as replacing regular workers by part-time workers. As a result, the unemployment rate has already increased to over 8 per cent, while labour force participation rapidly decreased to 58.0 per cent by February 1999.

The economic recession has greatly influenced the general features of youth transition from school to work. For a long time, labour-force participation of youth has decreased concurrently with increasing entrance into higher education (Tables 1, 2). The economic crisis further promoted this trend (Table 3). At the same time, the number of university and college students temporarily leaving study also increased, due to decreasing family income.

Table 1. Paths after vocational high-school graduation

Paths

1970

1980

1990

1995

1997

Graduates

62,854

201,057

274,150

259,133

273,912

Entrance to higher education (%)

9.6

10.1

8.3

19.2

29.2

Employed upon graduation (%)

50.2

51.1

76.6

73.4

64.8

Source: Ministry of Education, Korea.

Table 2. Paths after general high-school graduation

Paths

1970

1980

1990

1995

1997

Graduates

82,208

266,331

487,772

390,520

397,702

Entrance to higher education (%)

40.2

39.2

47.2

72.8

81.4

Employed upon graduation (%)

10.2

9.5

9.8

7.1

4.1

Source: Ministry of Education, Korea.

Table 3. Labour-force participation rate of youth 1997-1998

Age

Total

Men

Women

July 1997

July 1998

July 1997

July 1998

July 1997

July 1998

15-19

11.7

10.0

9.1

8.2

13.7

11.9

20-29

67.6

65.1

75.9

75.1

60.3

59.4

Source: Office of Statistics, Korea.

In Korea, lower educational attainment has not naturally meant a higher risk of unemployment. In a sense, the higher one's educational attainment, the higher was one's risk of unemployment. The economic crisis between 1997 and 1998, however, erased this paradox and brought the Korean labour market closer to that of the other industrialized economies. Table 4 summarizes the shift in the labour market. Also shown in Table 4, the economic recession primarily affected youth and, again, youth with low educational attainment. It is observed that university graduates are descending to the lower skill market, thereby increasing unemployment among high-school graduates. Therefore, the problem of increased youth unemployment became a very demanding policy task to address appropriately. In particular, high-school graduates, marked with the highest unemployment rate, should be given prime consideration as an at-risk group. They are largely composed of general high school graduates who did not enter university and those who lost jobs in manufacturing.

Table 4. Unemployment rate change 1997-1998

Age

Junior high school or under

High school

Higher education or over

1997

1998

1997

1998

1997

1998

15-19

8.3

23.3

8.1

25.1

20-29

4.6

12.3

4.3

13.1

5.0

9.8

Whole age

1.4

5.7

3.1

8.1

3.3

6.3

Source: Office of Statistics, Korea.

On the other hand, the unemployment amongst university and college graduates is becoming an urgent problem. As shown in Table 5, in terms of the volume of graduates leaving the school system, junior colleges and universities are the major suppliers of workers entering the labour market. Another important point is that the enrolment figure for vocational high schools is 700,000 students; for junior colleges and universities the figure is 1,500 students. Those students are the legitimate interest group concerning employment prospects. Thus, the transition from higher education to work puts far stronger pressure upon policy-makers.

Table 5. Students leaving the school system in 1998

High school drop-outs

High school

Junior college

University

Total

Number(10,000)

5

22 (4)

18

17

62

Proportion (%)

8.0

35.6 (6.5)

29.0

27.5

100

Source: Ministry of Education, Korea.
( ): academic high-school graduates.

One must note that considering the volume of leavers from the education system every year, contrasted with the notably high and increasing participation rate of aged workers in Korea, the Korean economy should have kept increasing by over 5,000 jobs a year. However, the Korean economy had already begun losing job-creation capacity from around 1990. Table 6 shows the downward trend of jobs from 1989-93. Labour market observers diagnosed declining employment as a result of the loss of job creation and of weakening competitiveness in manufacturing industries. This decreasing trend might have continued between 1994-1997, if not for the government's unwise intervention and the use of expanded foreign loans to artificially boost the economy, which finally culminated in the foreign currency crisis. From 1998, in addition to job loss from economic recession, employment adjustment became the biggest factor of job contraction. At present, the employment adjustment factor explains over half of the unemployment rate.

Table 6. Trends in job loss, 1986-1998

1986

1989

1990

1991

1992

1993

1998

Increase of jobs (1,000)

535

641

525

540

345

282

-1.260

Increase rate

3.6

3.8

3.0

3.0

1.9

1.5

-5.9

Source: Ministry of Labour, Korea.

1.3 Government action to combat unemployment

The government has responded to overflowing unemployment through various budgetary programmes of active labour market policies, including public employment services and training programmes. The amount of expenditure for these purposes surpasses US$ 10 billion a year. Unemployment allowances and subsidized work comprises the largest portion of expenditure now, the current emphasis of government action is being on short-term social protection and job security. Criticism against current policy measures is growing because of the questionable cost-effectiveness of the programmes. A dilemma is that the government spends vast amounts of money on subsidized work in industries, while strongly recommending simultaneous employment adjustment within enterprises, leading to increasing unemployment.

Public training programmes are now proliferating at a cost nearing US$ 1 billion. In 1998, over 350,000 people enrolled in these training programmes, run by 999 institutions including 150 higher education institutions. However, these programmes are not considered effective enough to achieve their objectives. The weakness of the programmes was analyzed in several points: quality of the programmes, limited consideration of learners, and lack of clear job-orientation. Disappointingly enough, observation is that less than 20 per cent of those enrolled become employed. The current training programmes might be viewed as quick-fix social protection, rather than skill formation leading to employment.

Youth unemployment gives cause for special concern among policy-makers and experts. Particular consideration is being given to those graduating from universities without a job. Even before the economic crisis, they were known to spend long periods in job-hunting; the situation is worsening very rapidly. The government prepared a targeted employment promotion package for this group. Under this package, 17,000 jobs were offered in the form of subsidized work or internship, and 10,000 people will be trained for jobs.

Despite the enormous amount of money to fund the programmes and the extensive efforts to implement them, unemployment continues to grow. Policy-makers gradually began to shift the policy direction from simple training provision to job creation and collaboration for school-to-work transition. For example, the government began to fund the expansion of jobs and a training information system linking employment service organizations. Business-creation activities across the university and industry are strongly supported by the government now. Fortunately, the rapidly growing infrastructures of the information network seem to be of great help for the development in these directions.