[Financial Essay] Is It Okay to Lower Your 'Expectations' When Job Hunting?

Differences in Wages and Job Quality When 'Downward Employment' Occurs Among 4-Year University Graduates

On the 8th, job seekers are lining up to enter the 2020 Public Institution Recruitment Information Fair held at the aT Center in Seocho-gu, Seoul, hosted by the Ministry of Economy and Finance. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Kim Min-young] “Don’t just aim high; lower your expectations when job hunting.”

This is a common phrase adults often say to job seekers. The longer the job preparation period, the more frequently this advice is heard.

Is it really okay to lower your “expectations” when seeking employment? If accepting a slightly lower wage shortens the job search period and allows you to start earning money quickly, making it comparable to those who take longer to prepare and secure so-called “good jobs” at large companies, it might be acceptable. However, reality seems different. We examined a report that comparatively analyzes the behavior of “downward employment” based on whether or not one has student loans.

It was found that those with student loans tend to accept relatively less favorable jobs due to the burden of debt. Additionally, when taking downward employment due to debt and other factors, there was a wage difference compared to those without loans.

According to a recent report by the Bank of Korea titled “The Impact of Student Loan Experience on Early Labor Market Behavior,” those with loan experience showed a tendency to accept lower wages and seek early employment to avoid remaining unemployed after graduation. The starting wage was about 2.8% lower compared to those without loan experience.

This suggests that the pressure to repay student loans immediately after graduation pushes graduates to rush into employment.

However, the wage gap observed in the first job narrowed through job changes and reemployment. Although student loan holders tend to have lower wages due to shorter job search periods, their cumulative earnings over 18 months after graduation were higher than those without loans.

Over 18 months post-graduation, loan holders earned an average monthly wage between 1.95 million and 2 million KRW. Those without loans earned between 2.05 million and 2.1 million KRW. This gap decreased over time. Immediately after graduation, the average wage for loan holders was 61,000 KRW lower, but this difference narrowed to 33,000 KRW over 18 months.

The reason for the decreasing wage gap is the cumulative income difference resulting from earlier employment by loan holders. Those without loans took on average 0.19 months longer to find their first job after graduation. Furthermore, the longer the job search period, the lower the starting wage. Graduates who secured employment before graduation had a starting wage of 2.122 million KRW, while those employed 6 to 12 months after graduation earned 1.8 million KRW, and those employed after more than 12 months earned 1.733 million KRW.

Loan holders also had 22.6% more job changes and reemployment instances compared to non-loan holders, indicating that they increased their wages through job transitions. The wage increase for loan holders was 26,000 KRW higher than for those without loans.

However, in large corporations or public institutions (including government positions), this wage gap actually widened. For regular employees at large companies, the wage gap was 0.82 percentage points one month after graduation, increasing to 1.24 percentage points at nine months, and 1.36 percentage points at eighteen months. The Bank of Korea stated, “Similar trends were observed when analyzing public officials and employees at public institutions, which are also considered ‘good jobs.’” This implies that job seekers with debt tend to choose relatively less favorable positions in large companies and public institutions compared to those without debt.

The Bank of Korea proposed some interest reductions to alleviate the burden on loan holders. The report stated, “If the early labor market behavior of loan holders is due to psychological pressure from accumulating interest, the government could improve policies by partially reducing student loan interest, allowing loan holders to extend their job search period and find jobs that better match their expectations.”

This study was based on data from the Korea Employment Information Service’s Graduate Occupational Mobility Survey (GOMS, 2013?2015), targeting 29,540 four-year university graduates under the age of 32. Among them, 30.6% had student loans, with an average loan period of 4.4 semesters and an average loan amount of 14.14 million KRW.

This content was produced with the assistance of AI translation services.