Young Adults' Perceived Economic Hardship Has Not Recovered to Pre-COVID Levels

FKCCI Announces '2022 First Half Generation-Specific Perceived Economic Pain Index'
Triple Burden of Soaring Prices, Job Drought, and Rising Debt Creates Vicious Cycle
"Regulatory Relaxation, Improvement of Dual Labor Market Structure, and Securing Employment Flexibility"

A job seeker participating in the '2022 Tourism Industry Job Fair' held on the 8th at aT Center in Seocho-gu, Seoul, is looking at the recruitment board. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Moon Chaeseok] It has been revealed that the economic hardship index felt by young people has yet to recover to pre-COVID-19 levels. As more young people resign themselves to a reality where debt is increasing rather than asset accumulation due to soaring prices and job mismatches, concerns are rising that the nation's growth engine is weakening.

The Federation of Korean Industries (FKI) announced the results of the "2022 First Half Economic Hardship Index by Generation" survey on the 14th. The survey disclosed combined values of perceived unemployment rates and inflation rates by age group.

According to the survey, the economic hardship index for youth (ages 15?29) in the first half of the year was 25.1, failing to recover to the 2019 pre-pandemic level of 23.4. Comparing this year's figure with those during the COVID-19 outbreak in 2020 (25.4) and last year (25.4%), it shows a 'standstill' level.

Soaring 'Youth Inflation' in Food, Accommodation, and Transportation

FKI pointed to the sharp rise in prices as a distinctive factor driving the hardship index increase this year. The youth inflation rate in the first half was 5.2%, more than ten times the 0.5% recorded in 2019. The skyrocketing costs of activities favored by young people have weighed heavily on their shoulders.

Based on data from the first to third quarters, inflation rates by expenditure purpose were transportation (11.7%), food and accommodation (7.3%), groceries and non-alcoholic beverages (5.9%), and other goods and services (5.5%), all exceeding the overall inflation rate of 5.0%. When considering the consumption expenditure share of youth, food and accommodation accounted for 21.6%, transportation 12%, and groceries 8.5%, in that order.

FKI explained, "Price increases have concentrated in sectors where young people spend heavily, directly hitting the living expenses of young people who are preparing for employment or are early in their careers with low income."

‘High-Level Jobs’ for Managers and Professionals Remain Frozen

The slow growth in high-income preferred job sectors such as managerial, professional, and clerical positions has also contributed to the gloomy outlook among youth. The increase in 'high-level jobs' is unable to keep pace with the growing number of university graduates. Over four years from 2017, 2.234 million university graduates entered the workforce, but only 1.264 million new high-education jobs (managers, professionals, clerical) were created, covering about 57% of graduates.

The perceived unemployment rate has also been slow to decline. As of the first half, the youth perceived unemployment rate was 19.9%, lower than 22.9% in 2019 but still significantly higher than other age groups. Following youth were those in their 60s (11.3%), 30s (9.5%), 50s (8.7%), and 40s (7.9%) in descending order.

The mismatch between humanities and science employment is becoming increasingly severe. As of the second half of this year, about 67.9% of companies’ hiring plans were for graduates in science and engineering fields, while only 30.8% were for humanities graduates. However, according to the latest 2020 data from the Korea Educational Development Institute and Ministry of Employment and Labor, among graduates from four-year general universities nationwide, 37.3% were from science and engineering fields, while 39.2% were from humanities.

FKI explained, "More than half of young people are employed in jobs unrelated to their majors, indicating that employment opportunities for youth are shrinking."

Using 30% of Assets to Repay Debt

Recently, as monetary authorities sharply raised the base interest rate to stabilize prices, market loan rates have also risen, leading to expectations that young people will suffer from a 'mountain of debt.' According to the Bank of Korea, the average household loan interest rate (newly contracted amount) rose by 87 basis points (1bp = 0.01 percentage point) from 3.94% in the first quarter to 4.81% in the third quarter.

From 2017 to last year, the debt growth rate among young households (household heads aged 29 or younger) was 48.3%, more than double the overall rate of 24%. During the same period, the increase rate of principal and interest repayments among youth was 34.9%, about 1.5 times the overall rate of 23.5%. Consequently, the debt-to-asset ratio for youth rose from 24.2% in 2017 to 32.5% in 2020, an increase of 8.3 percentage points. Although it decreased to 29.2% last year, it remains the highest among all age groups.

The overwhelmingly high proportion of jeonse (key money deposit) loans among young early-career workers is a significant burden. According to Statistics Korea, as of last year, 45.1% of credit loans among youth were for jeonse or monthly rent deposits, overwhelmingly the largest share. This amount is more than three times the 12.8% spent on living expenses. FKI expressed concern, stating, "During the stock and real estate booms, many young people took on excessive debt to invest or purchase homes, resulting in already high debt burdens."

Choo Kwang-ho, head of the FKI Economic Headquarters, emphasized, "The ongoing youth employment difficulties combined with soaring prices are increasing the economic hardships felt by young people. We need to create an employment environment where many quality private-sector jobs desired by youth can be created through regulatory reforms, improvement of the dual labor market structure, and securing employment flexibility."

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