"Improving Labor-Management Cooperation Increases Youth Employment Rate and Lowers Unemployment Rate"

Professor Kim Hyun-seok of Pusan National University Analyzes the Relationship Between Labor Market Flexibility and Youth Unemployment

[Asia Economy Reporter Dongwoo Lee] A study has found that labor market flexibility can increase youth employment rates and reduce unemployment rates.

According to a report titled "Analysis of the Correlation between Labor Market Flexibility and Youth Unemployment after the Financial Crisis," commissioned by the Korea Economic Research Institute to Professor Hyunseok Kim of Pusan National University, it was revealed on the 18th that each step improvement in 'labor-management cooperation' and 'wage-setting flexibility' raises the youth employment rate (ages 25?29) by 4.8 percentage points and 1.3 percentage points respectively, while lowering the youth unemployment rate (ages 25?29) by 3.7 percentage points and 1.2 percentage points.

Professor Kim explained that he derived these results by examining the relationship between 'labor market flexibility' and 'youth employment and unemployment rates' in OECD countries from 2009 to last year, based on data published by the World Economic Forum.

Labor-management cooperation and wage-setting flexibility were found to have a direct impact on youth employment and unemployment rates, while employment and dismissal practices and severance costs indirectly affect youth employment and unemployment rates through labor-management cooperation.

According to the "Global Competitiveness Report" published annually by the World Economic Forum, South Korea ranked 13th out of 141 countries in national competitiveness in 2019, placing it among the top tier, but its labor market flexibility ranking was 97th, placing it in the lower tier.

Among the detailed indicators that make up labor market flexibility, South Korea's labor-management cooperation score, which evaluates whether labor relations are confrontational or cooperative, was 3.59 points in 2019 (on a scale from 1 to 7), ranking 130th out of 141 countries, indicating that domestic labor relations are quite confrontational on a global scale.

Using quantitative methods, Professor Kim analyzed that if South Korea's labor-management cooperation score were to increase by 1 point to 4.59 in 2019, the increase in youth employment rates by age group would be 4.8 percentage points (ages 25?29) and 19.8 percentage points (ages 15?24), while the decrease in youth unemployment rates would be 3.7 percentage points (ages 25?29) and 6.4 percentage points (ages 15?24).

Among the detailed components of labor market flexibility, wage-setting flexibility in South Korea was 4.78 points in 2019 (on a scale from 1 to 7), ranking 84th out of 141 countries.

The report analyzed that if South Korea's wage-setting flexibility score increased by 1 point to 5.78 compared to 2019, the increase in youth employment rate would be 1.3 percentage points (ages 25?29), and the decrease in youth unemployment rate would be 1.2 percentage points (ages 25?29) and 1.8 percentage points (ages 15?24).

Employment and dismissal practices scored 3.54 points in 2019, ranking South Korea 102nd out of 141 countries. Additionally, South Korea's severance cost, converted into weekly wages, amounted to 27.4 weeks of wages, ranking 116th among the 141 countries compared.

Professor Hyunseok Kim stated, "If the youth employment crisis prolongs, it could lead to a shortage of skilled labor in the future and damage national competitiveness. Therefore, we must make every effort to establish institutional support to secure flexibility in the domestic labor market."

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