September 20, 2022 11:30
Young Koreans' obsession with landing places at top universities and jobs in a large conglomerate are counterproductive even though the country's economic development has been in some ways exemplary, the OECD warns in a new report.
The biennial OECD Economic Survey of Korea released Monday offers policy advice based on analysis of the country's economic situation and policies.
It warns of a "golden ticket syndrome" in Korean society, where competition is fierce to win a place at a top university in the hope of "a secure and attractive career in a large firm or the public sector."
The syndrome "has several negative effects, including low youth employment, a lot of time and money spent on private tutoring... skill and qualification mismatches, high pressure on students and low life satisfaction," the report says.
Education is expensive and often focused on the wrong goals, while vital vocational training has declined and students are busy acquiring the wrong skills. Failure to secure the golden ticket can therefore lead to lifelong frustration and impacts people's income, pension and social protection for years to come.
It warns that the resulting societal divides hold back productivity, well-being and fertility, resulting in one of the lowest birthrates in the world because women put off having children to stay in the rat race.
A key objective should be reducing labor market "dualism" -- the phenomenon whereby workers in small and mid-sized enterprises are paid substantially less than those in large firms.
"Sizable productivity gaps between large and small firms raise concerns of insufficient competition," the report adds, because unproductive smaller firms are often artificially propped up by various government subsidies.
It suggests that less emphasis should be put on regular employment and more non-regular jobs should be covered by social insurance so that the productivity gap can be reduced.
"Korea should harness the economic dividends of equal opportunity and fair competition to reduce productivity gaps, thereby narrowing gaps in pay and social protection and reducing the pressure to win a golden ticket," it says.
In other words, government spending should focus "less on supporting firm survival in an SME sector with chronically low productivity" and more on supporting ordinary people in vocational training and a broader social safety net in order to improve business dynamism and equality, according to the OECD.
Another factor is that the minimum wage may have increased too fast, it adds. It "reached about 63 percent of the median wage in 2019, after a nearly 30 percent-increase" between 2017 and 2019, which is "relatively high among the OECD countries."
"The rapid increase likely weighed on employment in SMEs. Subsides were put in place to help them adjust," but despite these efforts, "evidence indicates that 4.4 percent of workers earned less than the minimum wage in 2021," especially in agriculture, fisheries and hospitality, according to the OECD.
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