"Employment Freeze and COVID-19... Economic Hardship Among Youth Hits Record High"

Hankyung Research Institute Calculates Youth Perceived Economic Pain Index
Highest Level Since 2015 Measurement

Data provided by Korea Economic Research Institute

[Asia Economy Reporter Kim Heung-soon] Amid the frozen job market, the economic pain felt by young people this year has reached an all-time high, and this is the most severe among all age groups, according to a recent survey.

The Korea Economic Research Institute (KERI), under the Federation of Korean Industries, announced on the 14th that the "Economic Pain Index," which quantifies the economic difficulties felt by the public, was restructured to produce the "Generation-specific Perceived Economic Pain Index." As of the first half of this year, the perceived economic pain index for youth aged 15-29 was 27.2, the highest since it was first recorded in 2015 (22.2). This was followed by those in their 60s (18.8), 50s (14.0), 30s (13.6), and 40s (11.5).

Increase in Youth Perceived Unemployment Rate... Inflation Adds to Difficulties

The Economic Pain Index is an indicator devised by American economist Arthur Okun to measure the quality of economic life of the public by combining the unemployment rate and inflation rate. The generation-specific perceived economic pain index is the sum of the perceived unemployment rate and inflation rate by age group.

KERI analyzed that the worsening employment crisis this year has driven the youth perceived economic pain index. The youth perceived unemployment rate, which includes those working part-time while hoping for reemployment and those not economically active but willing to work, was 25.4% in the first half of this year, 2.2 times that of those in their 30s (11.7%) and 2.6 times that of those in their 40s (9.8%).

Looking at the trend of youth perceived unemployment rate, it rose by 1.0 percentage point (p) from 21.9% in 2015 to 22.9% in 2019, then increased by 2.5 p over two and a half years to 25.4% in the first half of 2021. Inflation also appears to have exacerbated economic difficulties. The youth inflation rate, which had remained in the 0% range since 1.6% in 2018, surged to 1.8% in the first half of 2021.

Data provided by Korea Economic Research Institute

Youth Sole Proprietor Closure Rate 20.1%, 1.6 Times the Overall Average (12.3%)

As the employment crisis continues, more young people are turning to entrepreneurship, but the situation for young self-employed individuals is also challenging. According to KERI, the closure rate of youth sole proprietors was 20.1% in 2020, 1.6 times the overall average (12.3%), and increased by 0.3 p from 19.8% in 2015, the only age group to worsen. In contrast, closure rates decreased in all other age groups during the same period.

In 2020, the industries with the highest proportion of youth sole proprietors were retail (11.6%), food service (6.7%), services (5.5%), and agency/intermediation/contracting businesses (5.4%). The closure rates for youth sole proprietors in 2020 were 24.1% in retail, 19.4% in food service, 19.2% in services, and 20.0% in agency/intermediation/contracting, ranking first among all age groups.

KERI explained, "Although young people are turning to entrepreneurship in industries with low entry barriers such as retail and food service, many fail to survive due to economic recession, minimum wage burdens, and intensified competition within the same industry." They added, "If young people at the early stage of their working life fail to enter quality jobs and instead start small-scale self-employment but become discouraged, they may not accumulate adequate work experience, making it difficult to settle in the labor market in the future."

Youth Debt-to-Asset Ratio 32.5%, Highest Among All Age Groups

The debt-to-asset ratio of youth household heads was 16.8% in 2015, the second lowest after those aged 60 and above (13.4%). However, from 2017 (24.2%) onward, it surpassed all other age groups and continued to rise, reaching a peak of 32.5% in 2020. This is analyzed to be because the rate of increase in youth debt is significantly faster than the rate of asset growth compared to other age groups.

Youth debt rose from 14.91 million KRW in 2015 to 34.79 million KRW in 2020, an average annual increase of 18.5%, while assets increased from 88.64 million KRW to 107.2 million KRW, an average annual increase of only 3.9%.

Between 2015 and 2020, net assets (assets minus debt) decreased by 1.32 million KRW only among youth, while other age groups saw net assets increase by at least 60.48 million KRW up to 108.92 million KRW during the same period.

Choo Kwang-ho, head of KERI's Economic Policy Office, stated, "With the prolonged youth employment crisis and the COVID-19 pandemic, the economic pain of young people is intensifying." He emphasized, "It is necessary to create many quality jobs for youth by enhancing the private sector's capacity for job creation through deregulation and securing employment flexibility."

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