The Korea Enterprises Federation (KEF) said the country's labor market polarization is deepening and called for greater market flexibility through eased employment regulations and wage system reforms.
In a report titled "Key Features and Implications of Recent Employment Trends" released Monday, the KEF identified three defining characteristics of the current job market: deepening K-shaped employment polarization, a record-high number of economically inactive people in their 20s and 30s, and declining labor mobility.
The federation found that employment increased in new industries, among workers aged 60 and older, at large companies and in regular positions, while it decreased in traditional industries, among workers under 60, at small and medium-sized enterprises (SMEs), and in temporary and daily positions.
By industry, the contribution rate to employment growth from 2021 to 2025 was led by health and welfare (43.0%) and professional and scientific services (17.2%), both posting double-digit figures. In contrast, construction (-9.4%) and wholesale and retail (-10.0%) saw significant declines in the number of workers. Manufacturing's contribution rate stood at just 0.9%.
The contribution rate from those aged 60 and older reached 95.5%, while the number of workers in their 20s and younger (-20.0%) and 40s (-12.2%) declined sharply. Businesses with 300 or more employees, which account for only 10.9% of total employment, contributed 34.8% to employment growth, indicating that job gains are concentrated in large enterprises.
"The labor market is recovering differently across sectors, with some maintaining growth momentum while others lag behind, creating a K-shaped recovery, or polarization," the KEF said. "Such growth gaps not only hinder young people's stable entry into the labor market and the formation of human capital but also deepen income polarization, leading to delays in marriage and childbirth, which could undermine the nation's growth potential."
Employment polarization was also evident in the "idle" population. Last year, the number of economically inactive people in their 20s and 30s totaled 717,000, the highest figure since the statistics began being compiled in 2003.
The number of idle youth has expanded rapidly, particularly among those who previously worked at SMEs and in daily positions. Among idle youth with work experience within the past year, 92.7% had left SMEs, and 47.1% had been in temporary or daily positions, according to the analysis.
The labor mobility rate fell to 9.8% last year, continuing its downward trend. The labor mobility rate, which shows how many workers enter and leave the workforce relative to the total employed during a given period, is used to measure the dynamism and vitality of the labor market.
This is interpreted as the result of companies reducing new hires in response to economic uncertainty while workers strengthened their risk-averse tendencies amid a contracting job market. Overall market mobility has slowed, with both new hiring and job-switching rates declining.
The KEF argued that to address these problems, labor market flexibility must be enhanced through eased employment regulations and wage system reforms.
To lower barriers to labor market entry, the federation stressed the need to shift away from a structure centered on protecting specific jobs toward one that supports worker mobility and reallocation. It said that clearly defining the criteria and procedures for terminating employment contracts in law would improve the predictability of corporate human resources management and ease employment burdens.
"The exit of young people from the labor market and the slowdown in labor mobility are warning signs that could constrain the economy's growth engine," said Lee Sang-cheol, head of the KEF's Employment and Social Policy Division. "We need a paradigm shift centered on flexicurity, which enhances labor market flexibility through the easing of rigid employment regulations and wage system reforms while expanding effective social safety nets."
