Chip-led growth, AI erode youth job quality: BOK

Korea's reliance on semiconductor-driven growth, while boosting the economy, is not translating into stable employment opportunities for young people. The Bank of Korea distinguishes between regular employment as the primary labor market and temporary or daily work as the secondary market. Its analysis indicates a growing tendency for young job seekers to enter the less stable secondary market since 2023, adjusting expectations as primary market hiring remains stagnant.

A key factor identified is a disconnect between economic drivers and job creation. Information technology (IT) manufacturing, a strong growth engine, generates relatively few regular jobs. Instead, most regular hiring still occurs in non-IT manufacturing and services. This prevents economic expansion from creating sufficient demand for regular workers, concentrating pressure on young people entering the workforce.

The rapid adoption of generative AI since late 2022 further complicates the situation. Industries heavily exposed to AI, such as finance and professional services, increasingly favor experienced hires. This shift reduces demand for the basic and entry-level tasks traditionally assigned to younger staff, impacting their entry into stable careers.

Additionally, strong protections for incumbent regular employees in Korea, ranked 10th among 23 major economies by the OECD for individual dismissal protection, may act as a barrier for new entrants. The Bank of Korea suggests that stronger employment safeguards often correlate with lower youth employment rates, contributing to the challenges faced by young job seekers.