Introduction to the Issue

Longer job searches and rising housing costs are intensifying economic pressure on young Koreans amid the country’s structural challenges and sluggish growth, according to a report by the Bank of Korea (BOK).

Job Market Challenges

Many young job seekers are experiencing prolonged job searches early in their careers. This is because companies are increasingly favoring experienced workers and adopting rolling recruitment methods, rather than traditional large-scale recruiting, due to sluggish economic growth. The report found that those who remain unemployed for one year have a 66.1 percent chance of securing a regular job five years later. However, this probability drops to 56.2 percent if their unemployment lasts three years.

Consequences of Prolonged Unemployment

Each additional year without a job is estimated to reduce current real wages by 6.7 percent due to a lasting “scarring effect.” This situation is similar to Japan’s “employment ice age generation,” which entered the labor market during the country’s prolonged economic stagnation in the 1990s and early 2000s.

Housing Costs and Burden on Young Adults

Rising housing costs are adding to the burden on young adults. Those who typically live in rental housing for school or work are facing markedly higher monthly rents due to a shortage of small, non-apartment units. This has led to a deterioration in housing conditions, with the share of young people living in substandard housing rising to 11.5 percent in 2023 from 5.6 percent in 2010.

Impact on Youth Debt and Assets

A 1 percent increase in housing costs is estimated to reduce total assets by 0.04 percent. Furthermore, the share of youth debt in overall household debt has surged to 49.6 percent in 2024 from 23.5 percent in 2012.

Call to Action

According to BOK official Lee Jae-ho, “The employment and housing challenges facing young people are structural issues that constrain the country’s long-term growth.” He emphasized the need for labor market reforms to reduce job polarization and the expansion of the supply of small homes to ease housing imbalances.

Conclusion

The economic pressure on young Koreans is a pressing issue that requires immediate attention. The combination of prolonged job searches, rising housing costs, and the resulting debt and asset implications are all contributing to a challenging environment for young adults. It is essential to address these structural issues to ensure the long-term growth and prosperity of the country.