Tuesday, January 28, 2014

Gary Shilling on Korea work and education

South Korea also doesn’t have a lot of unemployed people who can be put to work to increase output. The unemployment rate remains low, and the labor force participation rate has been rising recently despite the aging of the population, as is the case with many advanced countries except the U.S. and Canada. As with other highly industrialized lands, South Korea’s population growth has slowed to almost zero.

Meanwhile, the South Koreans’ legendary work ethic and zeal to get ahead continue to be apparent in the emphasis on education. The goal is to get into prestigious universities that lead to jobs in chaebol. Parents incur huge debts to pay for cram courses for their children’s entrance exams. These efforts seem to pay off. With the exception of China, South Korea ranks highest in reading and math, and is behind only Finland and Japan in science.

Nevertheless, with seven of every 10 high school graduates attending a university, there is a surplus of educated people. Estimates show that there are 50,000 more college graduates each year than the labor market needs, but there is a shortfall of 30,000 people for jobs requiring just a high school degree. Estimates are that 40 percent of college graduates are redundant.

South Korean youths pursuing an education are delaying raising families, contributing to the low fertility rate of 1.2 per woman and to low population growth. This compares with 1.4 in Japan and Germany, 1.6 in Canada and 2.1 in the U.S. Excluding immigration, a 2.1 fertility rate is needed merely to replace the population.

Also, because they are delaying their entry into the labor force while attending a university, young people’s contribution to GDP has been negative since 2009. They added about 2 percent a year from 1970 to 1990.