Thursday, October 28, 2010

If you think that YOU are underemployed, consider Korea: 3.7% official unemployment and yet...

Korea's most recent statistics show that Korea's official unemployment rate is 3.7%.  Korea's unemployment rate is the lowest in the OECD.  Do you know why this hasn't gotten that much attention in Korea, and why this number cannot be believed in its entirety?  Here now are the ugly facts.

First, the size of Korea's underground economy is enormous, 28% according the Korea Herald.  That basically means that the tax receipts of the country are approximately 28% x 30% = 8.4% lower than they would otherwise be.  The opportunity cost of 8.4% is, as expected, almost unthinkable.  From increased government spending on social services, to increased public works for financial stimulus, to increased national savings which would effectively push down the rampant inflation of food prices and other everyday goods, the economic and social cost of the size of the underground economy is too large to be ignored.

Second, largely unreported is the underemployment of the new college graduates.  How competitive is it to find a job for Korean college graduates?  The minimum wage is approximately USD $3.50/hours.  Perhaps more alarmingly, here is a list of some of the jobs that you need a college degree in order to qualify:  airline stewardess, casino dealer, airline ticketing representative.  I am not kidding about this.  Not only do you need to have a college degree, but these jobs are highly competitive.  It has long been the case that being an airline steward or stewardess at Asiana Airlines or Korean Airlines is a highly prestigious job.  Can the same thing be said for United Airlines?  No.

I could (and will in the future) go into further detail on these points, and add others regarding the dominance of the large conglomerates, the effects on the Korean economy, but this is a starting point so that we can discuss the underemployment in South Korea.


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