Korea Has Cafés on Every Corner—But Not Enough Good Jobs
Korea’s Talent Trap
What you do see everywhere in Seoul? Coffee shops. Great design, good beans, lots of laptops. But as for companies that can actually hire those coffee drinkers? That’s another story.
Korea is aging faster than any other country in the OECD. Fertility has fallen below one child per woman. And despite being the most educated country in the world (70% of young adults have college degrees), stable, well-paying jobs remain elusive for most.
South Korea’s labor market is quietly buckling under the weight of its own success.
Welcome to the two-speed economy
The Korean economic model still runs on a 1990s engine: massive manufacturers at the top—Samsung, Hyundai, SK—and a sea of small, under-productive firms everywhere else. SMEs make up 99.9% of all firms and 81% of employment, but their productivity is less than half that of large firms. In services, it’s closer to one-third.
Meanwhile, only 13.9% of jobs are in large firms, compared to 57.6% in the U.S.
That matters, because large firms don’t just pay better—they provide stability, benefits, maternity leave, and retirement security. The other 86%? Mostly self-employment, temp contracts, and survival-mode small businesses—especially in food, retail, and logistics.
And services are stuck in the slow lane
Services now employ over 70% of Korea’s workforce. But between 2013 and 2022, productivity in services rose only 6%—compared to 19% in manufacturing. In real terms, a manufacturing worker produces 2x more value than a service worker.
Worse still: some major service sectors have seen declines. Construction productivity is down 31%, utilities down 41%, and ICT services—yes, ICT!—fell 15%. This isn’t about lazy sectors. It’s about low investment, poor digital adoption, and policy architecture that protects inefficiency.
The labor market doesn’t help
Young Koreans enter the workforce late, then spend years jumping between unstable jobs. Many end up overqualified for roles that don’t require degrees. In fact, 31% of Korean grads say they’re overeducated for their jobs, and 49% are underemployed—double the OECD average.
Meanwhile, older workers retire early (often involuntarily) or go solo: 23.5% of Korean workers are self-employed, nearly 4x the U.S. rate. But these aren’t tech entrepreneurs. Think convenience stores, fried chicken chains, and tutoring centers—small, fragile, and under-digitized.
Why this isn’t just bad economics—it’s dangerous policy
For decades, Seoul has poured public money into protecting small firms instead of helping the good ones grow. There are over 1,600 SME programs across ministries. Banks are required to direct 45% of loan increases to small firms, regardless of performance. And outdated laws literally prevent large firms from entering sectors like bakeries or laundromats.
Sound pro-competition? It’s not. Korea’s obsession with protecting “smallness” is stifling productivity, wages, innovation—and even birthrates.
What Should Change?
A new ITIF report argues Korea needs a full productivity reset. Instead of protecting SMEs just because they’re small, it should reward firms that scale, invest, and innovate. It should bring tech—cloud, AI, automation—to lagging service sectors like logistics and construction. And it should rebuild a labor market where people can actually move, reskill, and reenter.
The challenge isn’t a lack of talent or capital. It’s a lack of structure that can turn both into long-term growth.
Or put differently: Korea doesn’t need more one-person shops stacked with unsold inventory in street markets. It needs more firms that can actually hire the people running them.
For more, check out: South Korean Policy in the Trump and China Era: Broad-Based Technological Innovation, Not Just Export-Led Growth
Let me know what you think.
And if you’re watching how labor markets evolve in aging economies under geopolitical pressure, Korea is the one to watch.
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