By Choi Sung-jin
The 12.5 percent record-high youth unemployment rate in January shocked the nation Tuesday -- and a private think tank believes the rate will probably stay high for some time.
"Many people point out that Korea follows the footsteps of Japan in many ways with an interval of about 20 years, and, as luck would have it, the youth jobless rate here is rising like that of Japan did two decades ago," says an LG Economic Research Institute report.
In the 1950s and 1960s, when Japan's economy grew 10 percent a year, its youth jobless rate was 2 percent, and it remained at a relatively low 4 percent in the 1980s. "Businesses hired graduates not by their ability but for their potential, and taught them work under the guarantee of long-term, or lifetime, employment," the report says.
But after the bubble burst and the economic growth rate tumbled below 1 percent, Japan's youth unemployment rate soared to 10.1 percent in 2003. This was because the Japanese companies, accustomed to long-term employment, made manpower cuts mainly through hiring fewer people.
"Since 2003, Japan's youth unemployment rate has begun to fall but it was due mainly to rapid reduction of young population," the report says.
Likewise, Korea's potential growth rate is expected to fall to 2.5 percent in the next five years, and to 1 percent by 2020, "barring innovative improvement in productivity," similar to the Japanese situation in the early 1990s.
"If Korea follows the example of Japan, youth employment is expected to improve after only the mid-2020s when the number of people age 15-29 begins to drop in earnest," the report says.
In a way, Korea will find it far more difficult than Japan to turn the situation around, given Japan's college entrance rate 20 years ago stood at only 30 percent but that of Korea today exceeds 70 percent.
"That explains why the nation needs a more fundamental policy to recover its growth potential and boost youth employment rate through far bolder industrial restructuring and developing new growth engines," the report says.
The 12.5 percent record-high youth unemployment rate in January shocked the nation Tuesday -- and a private think tank believes the rate will probably stay high for some time.
"Many people point out that Korea follows the footsteps of Japan in many ways with an interval of about 20 years, and, as luck would have it, the youth jobless rate here is rising like that of Japan did two decades ago," says an LG Economic Research Institute report.
In the 1950s and 1960s, when Japan's economy grew 10 percent a year, its youth jobless rate was 2 percent, and it remained at a relatively low 4 percent in the 1980s. "Businesses hired graduates not by their ability but for their potential, and taught them work under the guarantee of long-term, or lifetime, employment," the report says.
But after the bubble burst and the economic growth rate tumbled below 1 percent, Japan's youth unemployment rate soared to 10.1 percent in 2003. This was because the Japanese companies, accustomed to long-term employment, made manpower cuts mainly through hiring fewer people.
"Since 2003, Japan's youth unemployment rate has begun to fall but it was due mainly to rapid reduction of young population," the report says.
Likewise, Korea's potential growth rate is expected to fall to 2.5 percent in the next five years, and to 1 percent by 2020, "barring innovative improvement in productivity," similar to the Japanese situation in the early 1990s.
"If Korea follows the example of Japan, youth employment is expected to improve after only the mid-2020s when the number of people age 15-29 begins to drop in earnest," the report says.
In a way, Korea will find it far more difficult than Japan to turn the situation around, given Japan's college entrance rate 20 years ago stood at only 30 percent but that of Korea today exceeds 70 percent.
"That explains why the nation needs a more fundamental policy to recover its growth potential and boost youth employment rate through far bolder industrial restructuring and developing new growth engines," the report says.
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