“The wage shock of coronavirus youths will continue for 3 to 4 years…”

Enter 2021.03.15 12:00

An analysis by the Bank of Korea that the employment crisis caused by the novel coronavirus infection (Corona 19) not only negatively affects the wages of new college graduates, but also extends to the third to fourth years. Employment in large companies also had a negative impact for a considerable period of time. The negative effects were particularly shocking for those who graduated from middle and lower level and two-year colleges by college, and to graduates in the humanities field by college major.

On the 15th, the BOK released a report titled’BOK Issue Note: The Long- and Short-Term Impact of Deteriorating Employment Situation on New College Graduates’. The report analyzed the effect of the employment situation in the year of college graduation on the labor market performance of new college graduates on a long-term basis, and analyzed the effect of the recent deterioration in the employment situation on the labor market of young people.

As a result of the analysis, it was found that the rise in the unemployment rate caused by the economic recession such as the Corona 19 incident has a negative effect on the wages of new college graduates, and the effect continues to the third to fourth years. The’scarring effect’, which leads to a fall in wages for a long time, appears.

If the unemployment rate rises by 1 percentage point (p) in the graduation year, the annual wage for the first and second years is 4.3% lower, and it is estimated that the wage loss rate in the third to fourth years is significantly affected by 2.3%. The major causes were college graduates”downward jobs’, loss of opportunities to accumulate skills, inefficient job search activities, and lack of opportunities for promotion.

However, the size of the influence was found to be discriminatory according to gender, university, and major. The negative impact was greater for new graduates of middle- and low-ranking universities and two-year colleges rather than top-ranked ones. By major, it was revealed that the humanities graduates suffered the most. In the case of middle and low-ranking college graduates and two-year college graduates, when the unemployment rate rises by 1%p, 2-5% of wage loss occurs until the 3rd and 4th years, and they are more exposed to the negative impact of the labor market.

It was analyzed that the impact on the labor market at the time of graduation had a negative effect on not only wages but also employment in large companies. If the unemployment rate increases by 1%p in the graduation year, it is estimated that the likelihood of employment in large corporations will decrease by 3.5%p in the first and second years and 2.3%p in the third and fourth years.

The report said, “Until the youth unemployed and potential job seekers are resolved in the job market,
It is expected that it will take time, so the recent deterioration of the employment situation is a scar effect.
It is necessary to focus on not being connected to structural problems such as the power generation phenomenon. “We need to improve the labor market system that can induce labor movement,” he advised.