Youth Job Quality Worsens as AI Emerges... BOK: "Comprehensive Industrial and Labor Market Measures Needed"

BOK Issue Note: “Weak Youth Employment and Policy Challenges”
AI adoption strengthens preference for experienced workers
BOK: “Industrial and labor market policies must be improved together”

The Bank of Korea has found that the quality of employment has deteriorated, with the share of young workers in temporary and daily jobs rising in recent years. The problem stems from a combination of structural factors, including changes in artificial intelligence (AI) technology, industrial restructuring and a rigid labor market, pointing to the need for a comprehensive approach that combines industrial policy with labor market reforms.

According to a BOK Issue Note titled “Weak Youth Employment and Policy Challenges” (by Hwang Subin, Jeong Kanghee and Jeong Seongyeop), published on Oct. 26, the employment quality index for young people aged 15–29 fell from an average of 101.1 in 2014–2019 to an average of 94.7 from January 2023 through September 2026.

The employment quality index is a composite measure of the quality of jobs as perceived by workers, assessing factors such as job stability, financial compensation and working conditions. It is benchmarked at 100, the average for the period from January 2010 to September 2026, excluding the COVID-19 years of 2020 and 2021.

The quality of employment declined markedly only among young people. Over the same period, the index improved from 100.2 to 104 for prime-age workers aged 30–59 and from 97.8 to 105.6 for older workers aged 60 and above. In the more recent employment quality index, which sets January 2023 at 100, the figure for prime-age workers improved to 103.2 last month, while the figure for young people worsened to 94.8.

The BOK said the deterioration in job quality for young people appears to have resulted from a stronger tendency to enter the secondary labor market—centered on small and midsize companies and non-regular jobs—amid stagnant demand in the primary labor market, which is centered on large companies and regular jobs.

Hwang Subin, a manager on the BOK’s Employment Trends Team in its Research Department, said, “During the previous downturn from 2014 to 2019, young people mainly waited to enter the primary labor market, leading to a deterioration in quantitative indicators such as a rising unemployment rate. More recently, however, young people have lowered their expectations for employment and entered the secondary labor market, which appears to have led to a decline in job quality.”

The BOK said that stagnant demand in the primary labor market, identified as a key cause of weak youth employment, stems from industrial restructuring toward IT manufacturing, which has limited capacity to create regular jobs. The BOK noted a structural mismatch: IT manufacturing is driving production, but non-IT manufacturing and services still account for a larger share of regular-job hiring, so economic growth is not translating into expanded demand in the primary labor market.

The study found that demand for entry-level and basic work traditionally performed by young people is shrinking rapidly, particularly in occupations and industries with high exposure to AI, as employers increasingly favor experienced workers. According to the Ministry of Data and Statistics’ Economically Active Population Survey, the labor force participation rate and employment rate fell from 49.8% and 46.6%, respectively, in January 2022, just before the introduction of generative AI, to 46.8% and 43.7% in 2026. By contrast, the share of temporary and daily workers rose from 30.7% to 32.6%.

The BOK forecast that weak employment could persist even if demand in the primary labor market recovers, as young people who have accumulated in the secondary labor market may find it difficult to move into the primary market. Hwang said, “The share of young people who moved from the secondary to the primary labor market is estimated to have fallen from the 8% range in 2014–2019 to the 5% range in 2023–2024.”

The BOK also cited the rigid labor market structure as a factor preventing young people from entering the labor market. OECD statistics show that countries with stronger employment protections tend to have lower youth employment rates. South Korea’s “individual dismissal protection index for regular workers” ranked around 10th among 23 major countries, indicating a relatively high level of protection.

The BOK called for labor market reforms to be pursued alongside improvements to industrial policy. Hwang said, “We need to create conditions that allow the strong growth of IT manufacturing to spill over into related industries and domestic demand,” adding that “education and industry need to be closely connected to support growth centered on semiconductors and meet labor demand in the AI era.”

He added, “The employment system should also be made more flexible so that young people can enter and move through the labor market smoothly.”

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