In South Korea, the road to a good life is clear: study hard, get into a top university, and then work for one of South Korea’s family-owned conglomerates, often called chaebol. But for many of the country’s highly educated youth, this path has seemed more like a dead end. Korea boasts one of the highest tertiary education rates in the world, yet Korean youth find themselves increasingly unable to find a job. Although there are many explanations for this phenomenon, including education inflation and stigma surrounding vocational careers, one of the main drivers of youth unemployment is the chaebols. While the chaebols deserve much credit for driving South Korea’s incredible economic development over the past 30 years, they also deserve significant scrutiny. It is high time for the South Korean government to critically examine the ‘untouchable’ chaebols and determine a path forward that supports the new generation of job seekers.
Education and Employment in the Prestige Economy
In South Korea, reputation and educational credentials are deeply tied to an individual’s value in the job market. As a result, Korean youth go to great lengths to build their resumes, with the most prestigious accomplishment being securing a job with one of South Korea’s chaebols. The four largest chaebol—Samsung, LG, Hyundai, and SK—980.5 trillion won ($729 billion) in 2023, accounting for 40.8% of the country’s nominal GDP. In fact, 84% of South Korea’s GDP can be traced to just 64 companies.
Because of their incredible significance to the Korean economy, working for a chaebol carries almost unparalleled stability and status in Korean society. The larger the chaebol, the greater the associated prestige. In 2011, more than 100,000 individuals took Samsung’s entrance exam, increasing to nearly 200,000 test-takers in 2014. In 2015, Samsung had to switch to a new test format to accommodate the increase in test takers.
However, despite their significant market contributions, chaebols only represent about 10% of jobs in the country. As a result, young people are finding it increasingly difficult to secure one of these coveted positions in a chaebol, even as rates of tertiary education rise. South Korea has the highest percentage of youth with tertiary education among countries in the Organisation for Economic Co-operation and Development (OECD). Nearly 70% of Korea’s population between the ages of 25 and 34 held a tertiary degree as of 2023, which is 20 points above the OECD average.
Yet, despite their academic accolades, youth are turned away from jobs at chaebols in incredible numbers. In these cases, they have two options: accept lower employment or remain unemployed and wait for the next opportunity to work at a chaebol. Although many college graduates take the first option and find themselves in part-time or informal positions for which they are overqualified, most Korean youth opt to wait for a second chance. As a result, more than 5% of Korean youth are neither employed nor engaged in formal education or training (often referred to as NEETs). The NEET rate is especially high among university graduates; 45% of NEETs in Korea have a tertiary degree, compared to just 18% in the OECD.
Consequences of Inaction
As youth unemployment increases, the effects of the chaebol dominance in the minds of job seekers can be seen across the country. For one, as South Korean college graduates find it increasingly difficult to secure a good-paying and socially respectable job, there is growing disillusionment among Korean youth over the return on investment of higher education. On average, college degree holders earn only 24 percent more than high school graduates, compared to 69 percent more in the United States. University graduates also have a higher unemployment rate than their less-educated peers. With youth poverty rates on the rise, many Korean youth are questioning an educational and economic system they perceive to be working against them. Youth satisfaction in Korea is below 20%, lower than in most other OECD countries, and 60% of Koreans believe they have a low chance of improving their economic condition.
These feelings of hopelessness have been exacerbated by growing inequality in Korean society, especially in education. A recent study by the Bank of Korea found that parental income is the primary driver of educational disparities, not student potential. When comparing students from the top 20% of income to students in the bottom 80%, students in the highest quartile were more than twice as likely to attend a top university. Because chaebol tend to hire exclusively from Korea’s top universities, students from wealthier families have an advantage in the job search.
Besides the individual impacts of chaebol dominance, many small and medium-sized enterprises (SMEs) are also struggling with the economic reality. Despite Korea’s high youth unemployment rate, nearly 40% of SMEs face labor shortages. For one, pay at SMEs is drastically lower than at chaebols; on average, SME employees earn 50% as much as their chaebol counterparts. However, many Korean youth also take low-paying, non-regular employment at chaebols over more steady employment in SMEs, hoping to someday transition to a full-time position. Especially because the transition rate from SMEs to large companies is less than 3%, many Korean youth are willing to wait to work at large companies because they expect more returns throughout their careers.
Overall, high youth unemployment and the dominance of chaebol employers in the labor market have had a dampening effect on the Korean economy. After waiting years to enter a chaebol, many young Koreans eventually abandon entering the labor market altogether, often becoming financially dependent on their parents. They also frequently forgo major life events, such as marriage and having children, which poses problems for Korea’s rapidly aging population. Many estimate the economic impact of Korea’s NEET population to be 61.7 trillion won, which represents 3.2% of the nation’s total GDP.
For so long, the chaebol have been thought of as “too big to fail,” and government regulation has been sparse. However, younger generations are becoming increasingly aware of the adverse effects of the chaebol on the South Korean economy. Youth unemployment and educational pressures are just the tip of an iceberg of price discrimination, investment failures, and economic inequality. Although the chaebol have been a significant part of Korean economic development in recent years and will likely continue to play a role in the near future, South Korea cannot afford to continue turning a blind eye to the clear costs of inaction.
Especially with the upcoming presidential elections and increasing discontent with the status quo, there is potential for a major economic overhaul. Instead of serving as engines of opportunity, as they used to, chaebols now represent a closed system that locks youth out of meaningful economic advancement. Whether through structural reform, greater support for SMEs, or breaking up monopolistic circular ownership, the need to regulate chaebols has become more evident now than ever. As youth face an increasingly hostile labor market, South Korea has the opportunity to, through difficult but necessary policy action, redefine what prosperity means for future generations.
