The human factor in Korea's economic
woes By David Scofield
Sinking consumer confidence, a malaise
strangling South Korea's domestic economy, has roots
that go deeper than the "debt hangover", the aftermath
of a spending binge that has left Korean households with
a debt burden greater than residents in either the
United States or the United Kingdom. South Korea's
long-term growth potential is being arrested by high
youth unemployment and an exodus of the country's best
and brightest, two trends that could seriously impede
strong economic growth in Korea for the foreseeable
future.
Youth unemployment is a well-recognized
problem. Recent average unemployment numbers hover
around 3.3%, though reports by LG Economic Research
Institute and others cast doubt upon the validity of
these numbers. Government figures do not, for example,
include the many unemployed workers who have given up
looking for work altogether. Nor do the numbers include
those working for family companies and farms, businesses
that can no longer generate wages.
The
government data define employment in the broadest terms.
Casual, part-time, irregular workers are considered
employed for the purposes of the data, regardless of how
infrequently they work. Exacerbating the problem is the
size of the irregular workforce. More than 40% of
workers are not regularly employed in South Korea. But
even with the government's broad definition of
employment, more than 7% of young people 29 or younger
are officially unemployed, more than twice the national
average. But ironically, a lack of work is not the
problem.
While South Korea's young people see
less opportunity in the local job market, employers,
especially small and medium-sized firms, complain they
can't find enough able-bodied men and women to fill
their labor needs. The shortfall is as many as 139,000
positions per year, with many firms scouring the globe
in search of talent they can't find at home. The only
solution for many firms is to hire undocumented foreign
workers to fill the gap, but the Ministry of Labor
estimates the number of these workers to exceed 160,000,
and the government has declared war on these "illegal
workers". Arrests and deportations are frequent, but the
employers of these foreign fugitives decry the
government crackdown after the workers are deported, so
there is no one to fill the gap as South Korea's young
people shun anything associated with difficult, dirty,
dangerous work, the three-Ds trinity.
The source
of the issue is an entrenched belief among South Koreans
that the only path to success is to attain a university
degree. In response, private companies and individuals
have built a staggering number of universities - more
than 134 four-year universities, not including
specialized graduate schools or two- and three-year
colleges, in a country of just 49 million. So colleges
have been built that today virtually anyone can attend
and, as these schools are private for-profit
enterprises, their unregulated growth has created a glut
of universities, with many focusing their energies on
retaining students (and their tuition fees). Many of
these overemphasize festivals and parties, shielding
their students from the rigors of academic life.
For many, the university these days is less a
place for critical thinking, analysis and contemplation
than a break from the hell of the university entrance
exam for which they spent their teenage years preparing,
as a key step into corporate life. Most students spend a
disproportionate amount of time preparing for corporate
and government exams, qualifications designed to open
the door to a nice, safe desk job with a large
conglomerate, the dream job of many graduates. But what
is being taught within the country's universities is not
what the job market demands.
Samsung forced
to retrain university-grad engineers Samsung
Electronics, for example, recently admitted spending
more than US$65 million a year to retrain the 6,000 or
so university-educated engineers they hire every year,
since even after four years of study, they don't have
the skills necessary to work in the field. The result of
South Korea's quantity-over-quality approach to
post-secondary education is that more than 2 million
undergraduates and another 1 million junior college
students are enrolled in South Korea at any one time,
many of them lacking the specialized training many firms
need, and viewing anything remotely related to the "3D"
industries as taboo. This mindset has severely hurt
Korean firms of all sizes, leaving fabricators,
manufacturers and high-technology systems designers
without the manpower they need to complete orders, bid
on new projects and expand.
The government's
response has so far been piecemeal and short-term. To
help smaller firms attract the talent they need, Seoul
has allocated $431 million to grant programs this year,
designed to offset the wage burden to smaller firms
(fewer than 300 employees) by partially paying the wages
of young employees, but the program has been a failure,
since only a fraction of the funds earmarked for the
scheme has actually been allocated. The problems,
according to the firms targeted by the scheme, are the
program's short length of one year, and the cumbersome
and time-consuming bureaucracy that must be navigated in
order to receive the funds. According to the Korea
Federation of Small and Medium Business, small firms are
not interested in these stopgap measures. They cannot
afford to hire and train a worker, only to lose him a
year later when the program ends. As well, South Korea's
aversion to employment in these less glamorous fields,
especially in small firms, often means that no sooner is
the employee trained than he or she leaves in search of
more socially respected work, or goes back to
university.
Further blame lies with Korea's
families. South Korea's rapid development has led to a
radical jump in income and life opportunities for
today's younger generation. It's common in Korea for
parents to shelter their children from the perceived
hardship of hard work, offering them free room, board
and "pocket money" well into their adult life.
Christianity may be widespread in South Korea, but the
Protestant work ethic isn't part of the package.
For foreigners new to South Korea, this can come
as shock. An American executive, recently installed to
manage a newly acquired Korean company, was introduced
to this mindset during a business orientation meeting.
He graduated from a state university in the Midwest.
He's proud of the fact that he worked full-time while
studying, putting himself through school with hard work
and determination. But upon arriving, Korean executives
told him to omit that experience when talking with
Koreans. "They'll think you're lower-class and poor if
you tell them you worked your way through school or come
from a rural background," he was told.
Drive
for status fuels household debt problem In South
Korea, class and position are determined by income.
Those of the higher classes have a corresponding higher
income, and their children live accordingly. But the
mentality does not stop with those who are the most
economically well-heeled. In Korea image is everything -
another truism that anyone doing business of any
description soon realizes - and as such, those families
who are not elite will often create the impression that
they are - a large contributing factor to South Korea's
household-debt problem. The result is a new generation
of Koreans with far less belief in the rewards of hard
work, qualities that underpinned South Korea's rapid
development.
Those who do hold top positions
within South Korea seem to be heading for the door. For
them the rigid, depersonalized nature of the Korean
education system, the lack of social development and
improvements in quality of life and standard of living
are prompting more and more to look for a better life
for themselves and their children in the West. According
to the Switzerland-based International Institute for
Management Development, South Korea is not retaining
vital human capital at the same rate as its competitors.
The institute created an index from 0-10, based on the
propensity for highly educated individuals to want to
move abroad. A higher number indicates fewer people
wishing to leave. In 1992 South Korea scored 7.3, but
last year that figure fell to 4.6, well behind Japan at
6.2, Finland at 8.1 and Ireland at 7.6, indicating that
a substantial portion of South Korea's vitally important
human resources wish to leave.
South Korea's
comparative advantage in the world market is its human
capital. Without minerals to sell or oil to tap, the
Korean people are the foundation of the nation's
economy. South Korea's current economic crisis could get
worse if younger people continue to snub employment that
they consider to be beneath them and not socially
elevating, if the nation's ubiquitous universities
continue to turn out unqualified graduates without the
specialized skills the labor market demands, and if the
nation's most talented and best educated continue to
look beyond Korea for a better standard of living and
way of life.
David Scofield, former
lecturer at the Graduate Institute of Peace Studies,
Kyung Hee University, is currently conducting
post-graduate research at the School of East Asian
Studies, University of Sheffield, United Kingdom.
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