Kim Hye Min boasts a 4.0 grade- point average at one of South Korea’s top colleges, a perfect score in English proficiency and internships at Samsung Card Co. (029780) and AT Kearney Inc. All of her 20 job applications were rejected.
“A degree from a good university used to guarantee a spot at least at a top 10 company, but that was when a college degree actually meant something,” Kim, 25, said on Aug. 28, as she walked to a Chinese lesson she’s taking to boost her chance of joining one of the nation’s most prestigious employers. “I studied hard and did everything right, but there are too many of us who did.”
University students look at employment information booklets at a job fair organized by the Ministry of Knowledge and Economy in Seoul. Photographer: SeongJoon Cho/Bloomberg
A 20 year old job seeker looks at employment information at a job fair in Seoul. Photographer: SeongJoon Cho/Bloomberg
Lee Myung Bak, South Korea's president's new message to many high-school students is: Skip college and go to work. Source: Yonhap News via Bloomberg
With almost three out of four high school students going to college in an effort to get a top-paying job in one of the leading industrial groups, known as chaebols, South Korea is being flooded with more college graduates than it needs. Its 30 biggest companies hired 260,000 of them last year, leaving another 60,000 to swell the youth unemployment rate to 6.4 percent in August, more than twice the national average.
The government’s response is a U-turn from decades of increasingly competitive and expensive education that made South Korea No. 1 in the world for academic qualifications. President Lee Myung Bak’s new message to many high-school students is: Skip college and go to work.
“This is the price South Korea is paying for its education fervor and social pressure on everyone to want the same jobs,” said Sung Tae Yoon, an economics professor at Yonsei University in Seoul. “The problem is not the lack of jobs, it’s the lack of quality employment and the lack of flexibility among job seekers to consider options beyond the conglomerates.”
South Korean students are pushed to study more than 12 hours a day in order to get to one of the top colleges, like Yonsei, from which companies such as Hyundai Motor Co. (005380) and Samsung Electronics Co. (005930), the biggest shareholder in Samsung Card, typically draw their executive graduates.
While more and more children achieve the required academic success, the coveted top 30 business groups in Asia’s fourth- largest economy account for only 6.8 percent of total employment, according to Federation of Korean Industries data.
Many rejected applicants don’t even show up in official jobless numbers. One quarter of all college graduates under the age of 30 are classified as “Neets” -- not in education, employment or training -- and are excluded from unemployment data. Lee Joon Hyup, a research fellow at Hyundai Research Institute in Seoul, estimates the real youth jobless rate -- for those between 15 and 29 -- is as high as 22 percent.
That compares with a rate of 0.8 percent in Singapore for 15-to-24-year olds in June, 2011, the latest published data from the Ministry of Manpower. In the U.S., the unemployment rate in August for those age 16-to-24 was nearly 17 percent, according to the Bureau of Labor Statistics.
“Reckless university enrollment has aggravated both the private education burden and youth unemployment,” President Lee said last month during a visit to a job fair in Seoul. “It’s a huge loss, not just for households but the whole country.”
Last year, 99.7 percent of South Korean teenagers attended high school and more than 95 percent of those graduated, according to the Education Ministry. Nearly 84 percent of high- school graduates enrolled in college in 2008, the latest year comparative data are available from the Organization for Economic Cooperation and Development. That was the highest rate among the organization’s 34 members.
The drive for academic success, underscored by Confucian values of education and hard work, has spawned more graduates. Of young adults, 25 to 34 years old, 98 percent had at least a secondary education in 2009, the highest rate in the OECD, according to a 2012 report by the organization. That compares with 40 percent for South Koreans in the 55-to-64 bracket.
The situation in South Korea contrasts with the U.S., where 68 percent of high school students attended college in the fall immediately following graduation in 2010, prompted by better employment prospects and higher wages for those with degrees. That compared with 49 percent in 1980, according to the National Center for Education Statistics.
The U.S. unemployment rate for those age 25 or older who held a bachelor’s degree and higherwas 4.5 percent in August, compared with 8.4 percent for high school graduates, BLS data shows. The pay advantage for four-year college graduates over high school grads has doubled over the past 30 years, according to a recent study by the Federal Reserve Bank of Cleveland.
South Korea’s President Lee, himself a vocational school graduate, attributes youth unemployment to the entrenched competition for academic credentials and has introduced policies to encourage young people to skip college and “work first, study later.”
To persuade companies to hire high-school graduates, the government in September 2011 started offering companies tax incentives of up to 20 million won ($17,776) for each one they employ. Career counseling services and job fairs help teenagers explore options other than college. Funding has increased for vocational schools, which are designed to prepare students directly for employment as engineers and other professions.
The results are beginning to show. Banks nearly tripled the number of high-school graduate recruits in the first half of 2012 compared with the same period last year. Government- controlled Woori Bank, Korea Development Bank and Industrial Bank of Korea doubled their hiring quota for the same group.
Kim Ye Bin, 18, is one beneficiary of Lee’s policy. After attending the vocational Yeosu Information Science High School in the southern port city of Yeosu, she got a job at Korea Asset Management Corp. under the special recruitment program. She’s training to provide consulting services to poorer families with low credit ratings.
“I decided to get a job first, rather than following others to college, as I heard many college graduates have trouble finding jobs,” Kim said. She still worries that her future advancement may be curbed “in a society filled with college graduates” because she only has a high-school diploma. “I may need a university degree someday but I hope employers will value work experience more than academic background.”
To succeed, the government will have to wean South Korean society off a culture of academic ambition. Families spent 20.1 trillion won on private tuition last year to boost children’s chances of a place at a good university. College students took out 34.2 billion won in June from private loan sellers to fund tuition and living costs, according to the privately funded Financial Supervisory Service in Seoul. South Korea had the second-highest share of private funding for education among the 34 OECD member states, according to an OECD report released yesterday citing 2009 data.
The proportion of vocational-school students going on to college fell to 61 percent last year, from 74 percent in 2009, as Lee’s policies encouraged graduates to enter the workforce, Ji Hye Jin, an Education Ministry official who handles vocational-school policies, said in a Sept. 11 phone interview.
The government’s “work first, study later” policy is a Band-Aid to cover the underlying problem that the economy needs to create more jobs that college graduates want, said Moon Keun Chan, a business administration professor at Soongsil Cyber University in Seoul.
“The battle for a handful of jobs at top companies is a result of South Korea’s unhealthy, decades-long reliance on chaebols,” said Moon. “The chaebols found a way to generate profit without hiring many people by monopolizing business opportunities, giving no chance for small businesses to grow.”
An Jong Hyun, an official at the Federation of Korean Industries, a lobby group for conglomerates, said the surplus of college graduates was a structural problem in Korean society that needs a comprehensive set of policies to resolve.
“Youth unemployment is a combination of graduates’ rising expectations and the lack of policies nurturing growth from small and medium businesses,” An said in a telephone interview on Sept. 11. “It isn’t right to attribute it to the lack of jobs created by larger corporations. The business groups are working continuously to hire more people.”
Last month, 24 ruling New Frontier Party lawmakers, led by Nam Kyung Pil, submitted a bill to parliament that would restrict the power of the chaebols’ controlling families to redirect capital between units, which are tied by a network of cross-shareholdings and weighted voting rights. The practice gives the groups an unfair advantage over smaller businesses that lack the resources to compete, the bill’s supporters say.
With a presidential election coming up on Dec. 19, both leading parties have named youth job creation as a key campaign issue to win over younger voters.
College graduates like Kim Hye Min would rather keep trying to land a place at one of the top companies instead of starting work at a lower-tier firm. In a 2010 survey of 3,000 students by the Korea Employment Information Service, 40 percent said they would be willing to spend a year unemployed rather than settle for a lower-paying job. The average starting annual salary for a new hire at a conglomerate this year was 34.6 million won, or 54 percent more than at a small- or medium-sized business, according to an April survey by online employment agency JobKorea.
South Korean companies hold a second round of applications this month and Kim is applying again to the same 20 companies that rejected her in the spring, hoping her new Chinese skills will give her an edge.
“I’d rather be unemployed with a college degree than employed with just a high-school diploma,” she said. “I don’t want people to think I’m under-educated. My degree vouches for my hard work. I hope it will eventually pay off.”