SEOUL, Oct. 7 (Korea Bizwire) – Technological progress has mainly affected young job seekers in South Korea because businesses tend to cut down on hiring first when seeking cost-saving measures, a report said Sunday.
The report — the work of three authors, including Lee Seo-hyun from the Bank of Korea (BOK) — said technological advancement comes with improvements in capital efficiency, such as better machinery, and it leads management to replace workers with machines.
It said that based on employment data from 2000-2014 in South Korea, the elasticity of substitution between physical capital and workers in the 15-29 age group was 1.77, compared to 1.54 for those aged between 30 and 64. Elasticity of substitution shows how easy it is to replace one thing with another — a higher number indicates greater flexibility.
In terms of occupational groups, educational levels and size of firms, the younger generation is more susceptible to such managerial decisions.
“As technology advances, young workers are more easily replaced by capital than elder workers,” said Lee. “Businesses cut back on new employees to set up new machines, while they tend to hold onto the skills and experience of elder workers.”
The findings are in line with recent trends in South Korea’s job market, where the unemployment rate for young people is much higher than in general due partly to a change in industrial structure and a protracted economic downturn.
According to latest government data, the country’s jobless rate for young adults — those aged between 15 and 29 — was 10 percent in August, while the overall unemployment rate stood at 4 percent.