What's a College Degree Worth? Not Much for Young South Koreans

Choi Young-ju earned her law degree three years ago from a South Korean college. She still hasn't found a job.

For two years, Ms. Choi has been trying to pass the government's civil-service exam to get hired as a police officer--if she can be one of the less than 1% of female applicants accepted to the force. She has failed three times, a familiar tale among a generation overflowing with college graduates competing for too few jobs.

Ms. Choi's luck could change if South Korea's new leader gets his way. President Moon Jae-in wants to create 810,000 new public-sector jobs over the next five years, an increase of more than 60%, at a cost to the government of $18 billion.

"Unless we urgently come up with extraordinary measures to address this problem, youth unemployment will increase to the level of a national disaster," Mr. Moon told parliament on June 12, one month after he took office.

South Korea's slowing economic growth has left a job shortage for recent college graduates whose parents were virtually guaranteed work by the country's rapid 20th century transformation into an industrial powerhouse. Simmering discontent helped drive mass protests against former President Park Geun-hye, who was forced from office in March, and powered Mr. Moon's election.

About 1 million people are out of work in South Korea, half of them between 15 and 29 years old. Many frustrated young job seekers can be found in Noryangjin, a Seoul neighborhood known for its fish market and a concentration of shabby low-rises housing government-exam cram schools.

"It's a gloomy place," said a 29-year-old civil servant who took four years to pass the exam, failing 17 times.

Students there obsess over the lack of options if they don't pass--and many don't. "It's like you're at the edge of a cliff," he said.

Mr. Moon is promoting his five-year plan to create jobs, spur companies to convert temporary contract workers into full-timers and increase the minimum wage.

Lawmakers have yet to approve spending to pay for the plan, an early obstacle at home for a president who must also deal with an increasingly fraught military crisis with North Korea.

Lee Phil-sang, a professor of economics at Seoul National University, said Mr. Moon's hiring splurge would be unsustainable because of underlying economic challenges. To boost employment, Mr. Lee said, South Korea needs to foster competition against the chaebols, the large, family-run business empires such as Samsung and Hyundai that dominate the economy and were vital to the country's reinvention as an industrial powerhouse.

During his campaign, Mr. Moon proposed increasing taxes to help the state pay for new hiring. His government has since said it would do so gradually to avoid stifling private-sector job creation.

Mr. Moon did get a small win over the weekend when the independent Minimum Wage Commission said it would raise the benchmark by 16.4% at the start of 2018, the largest annual rise since 2001. Mr. Moon wants the wage to go even higher, despite pushback from small businesses.

That doesn't help college graduates, who generally aren't looking for minimum-wage-level jobs.

The president said he would meet with the heads of the chaebols to spur them to help create more jobs. He has appointed a critic of the conglomerates to head an antitrust watchdog in a bid, among other things, to improve transparency and create a level playing field for smaller companies.

"There's a limit to how many jobs can be created by large companies alone," said Lee Gyoung-sang, head of the research division at the Korea Chamber of Commerce and Industry, the country's largest private business organization. "They need to support small and medium companies that they've partnered with to help them to grow and create more jobs."

A spokeswoman for the Federation of Korean Industries, a chaebol lobby group, declined to comment on the role of large conglomerates in job creation.

Young South Koreans are among the most educated in the developed world, when ranked by percentage of college graduates. But as South Korea's economic growth has slowed--to 2.8% in 2016, down from an annual average of 8.6% in the 1980s--the private sector is no longer creating enough jobs for college-educated youth.

"High youth unemployment is reflective of a structural, supply-demand mismatch in the labor market," said Tieying Ma, a Singapore-based DBS Bank economist. South Korea needs to move up the value chain in manufacturing and services to tackle the structural problem, she said.

The jobless rate for South Koreans between 15 and 29 years old reached more than 10% this year, more than double the overall rate.

Less than 3 of every 100 applicants to South Korea's large conglomerates get hired, while around 17 of 100 get jobs they apply for at small and medium-size companies this year, according to the Korea Employers Federation.

The bleak jobs picture forced as many as 17,000 college seniors to delay graduation this year and remain enrolled to avoid the stigma of a gap on their résumés.

"I feel comfortable when I introduce myself as being at school, rather than jobless," said Lee Eun-byeol, a 24-year-old who was due to graduate in August 2016. She said she has made 20 fruitless applications to conglomerates.

For law graduate Ms. Choi, a 26-year-old Seoul native, to become a police officer, she will need to pass a series of exams, a physical and an interview.

"If I gave up on this, I wouldn't know what to do," she said.

Write to Eun-Young Jeong at Eun-Young.Jeong@wsj.com and Kwanwoo Jun at kwanwoo.jun@wsj.com

(END) Dow Jones Newswires

July 18, 2017 05:44 ET (09:44 GMT)