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A Study on Labor Market Mismatches - Focusing on 8 Major Manufacturing Industries in Korea

Author Kim Ju-young, Park Jin Date 2017.12.20 Page
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Small and medium-size manufacturers in Korea have complained of a chronic labor shortage despite the government’s multi-faceted efforts to help jobseekers find jobs at small and medium-sized enterprises (SMEs). 

 

However this labor shortage seems to be more of a mismatch in the labor market, a chronic problem not easily resolvable through government action. The government has encouraged young people to work for SMEs through employment assistance, income tax breaks and other incentives. The Naeil Chaeum (Brighter Future) Mutual Aid Program for Young Workers promotes job stability by using tax benefits to encourage employees to stick with their positions at SMEs longer. Yet the labor shortage at SMEs shows no signs of alleviation. Meanwhile, the unemployment rate for people aged 15 to 29 has increased, from 7.9 percent in 2001 to 9.8 percent in 2016. Thus the labor mismatch problem presents a paradox characterized by a chronic labor shortage at SMEs and rising youth joblessness.

 

In a quantitative sense, large businesses in new growth industries that many young people aspire to work in also suffer from a labor mismatch, though on a smaller scale than their SME counterparts. Companies in new growth sectors say a gap lingers between the knowledge and skills employees acquire from educational and vocational institutions and what is needed in the field. Executives from the semiconductor and biotech industries complain of a shortage in skilled personnel despite rising production and investment in these areas. 

 

Their labor mismatch is less severe than that of SMEs in quantitative terms, yet it poses a more crucial question in a qualitative sense as the growth t new industries outpaces those in all other economic sectors in Korea. 

 

In addition, other external shifts in the labor market, such as demographic changes and rapid technological development, have compounded the mismatch. This calls for the strategic preparation of mid- to long-term policy plans.