Reskilling Workforces: South Korea
Some challenges companies are facing to reskill employees in South Korea include the population not being able to keep up with the rapid expansion of automation, the costs involved in reskilling and readapting the workplace to accommodate older employees, and the heavy reliance on temporary workers, especially among SMEs.
Rapid Expansion of Automation and RPA
- Over the last few decades, the South Korean government made numerous successful investments, aiming to establish the country as a technology hub. The government invested in industrialization, provided support for a few large firms, known as chaebols, and made significant investments in STEM education and applied R&D.
- It is the most automated country in the world, with 631 robots per 10,000 employees, eight times the global average. The country has high rates of STEM graduates (32%) and ranks fourth in number of patents filed. Labour force quality is considered "one of the most important drivers in Korea’s economic and industrial success."
- However, this focus "left its workforce somewhat unprepared for the challenges of the global value chain (GVC) upgrading in the future." Despite its strong focus on higher education, the country tends not to place importance on lifelong training initiatives required to adapt to automation and other digital technologies.
- The emphasis on STEM left other fields with limited development. Furthermore, the dominance of chaebols associated with low labor flexibility prevents "knowledge flows into SMEs, thus retaining the benefits of GVC participation for a select few."
- South Korea ranks 27 out of 140 in terms of digital skills among the population. Research suggests that a "growing share of adults will need reskilling at all ages to cope with longer working lives."
- South Koreans are aware of this problem. Around 70% of workers surveyed by the Boston Consulting Group feel that "their jobs will be greatly affected by technology changes or globalization." Another study discovered that, in fact, 43% of the South Korean workforce faces a significant risk of automation. Looking closely at the different groups, older workers are even more exposed, with 63% exposed to automation and unemployment.
- There is a significant disparity between the young employees adapted to Industry 4.0 requirements and the ageing workforce, which happens to be the largest in the OECD area. Only 10% of South Korean employees over 50 have the digital problem-solving skills needed for today's market.
- South Koreans not being as proactive as other countries to pursue learning opportunities. They are aware of the impact and are somewhat willing to spend time learning but stand somewhere in between "proactive adapters" and "hesitators." Considering that South Korea is the country with the highest adoption of RPA, the population should probably be leading the pursuit of learning opportunities instead of falling in the middle of the pack.
- After its digital transformation, the Industrial Bank of Korea created a system in which workers were allowed to switch to a new desired job. The system determines if the conversion is appropriate through education and training. Workers' interest in digital-related education increased due to the program.
Reskiling Older Workers is Expensive
- Many older workers are finding "increasingly challenging" to cope with the market's transformations. Given that estimates show that 31% of South Korea's population will be over 65 by 2040 (versus 12.97% in 2015), reskilling and retaining senior employees will be a necessity in the future. Training could help "mitigate the negative effect of an aging workforce on productivity as workers continuously upgrade their skills in response to rapid technological progress."
- However, companies in South Korea usually prefer to replace these workers. A study analyzed the profile of South Koreans receiving job-related education and discovered that they tend to be younger males. About 49% of those aged 26-35 participated in vocational training, while that number drops to 18.3% for those in the over 50 group.
- A survey with 220 manufacturing companies in Seoul found that 72% said that it is difficult to adjust the workforce to retain older employees and 60% said that maintaining older employees increases labor costs.
- Furthermore, leading companies in the country tend to have a mandatory retirement age, usually around 55, as they prefer to hire new employees than to retrain older ones, who are left to feel pressured and "shamed into quitting by fears of having become a burden, earning more than younger workers waiting to rise up the ranks."
- Koreans tend to remain with the same employer until retirement. If these employers are not providing reskilling and training opportunities, these workers are likely to lack skills necessary to re-enter the workforce. As expected, there seems to be a feeling among these older workers that there will be no place for them in the market, apart from low-wage positions, such as janitors, and are not motivated to engage in learning opportunities.
- The Korean government has a training program for senior civil servants called Senior Executive Program, which comprises nine grades. Sixty-percent of the program is devoted to personal development and 40% to work-related development.
- Research suggests that South Korea needs a large-scale reskilling or upskilling, especially geared toward "mid-career professionals and other workers. Technical upskilling needs to be complemented by either acquiring or sharpening soft skills and competencies demanded by the changing nature of the work ecosystem."
- The country has one of the highest rates of temporary employment in the OECD. As of 2017, regular workers accounted for 50.2% of the workforce, non-regular workers for 24.4%, and non-wage workers such as self-employed for 25.4%.
- Moreover, 87.2% of South Korean employees work for companies with less than 250 employees, a significantly higher share than other developed countries. These companies may not have the resources to invest in reskilling their employees, which could explain why South Korea has the highest worker turnover rate in the OECD. The lack of resources associated with low labor mobility means that they are often struggling to find suitable employees.
- SMEs are turning to temporary workers to address these challenges. They are also hiring temporary workers to become more adaptable to new work challenges at a lower cost, as they can replace them easily. Kim Dong-wook, director at the Korea Employers’ Association, explains, "Shedding staff is really difficult even if there are real laggards, unless the company is on the verge of going under. So companies prefer hiring contract workers, who are paid less and are easier to sack."
- However, the country was already facing a labor shortage and a skill mismatch problem in last few years, and the pandemic made it worse. COVID-19 is pushing the percentage of temporary workers even higher, with many full-time employees being forced into contract jobs as the pandemic resulted in massive layoffs. These workers "are likely to endure long-term hardship due to mismatches between their deteriorating skill sets and the (potentially harder-to-fill) available jobs."
- Studies have shown that temporary workers are not as likely as permanent workers to go through reskilling and training programs in South Korea. These are more likely to report that they are not learning new skills or only learning skills that are specific to their current job.
- Since they are not associated with an employer for an extended period, it is difficult for temporary workers to find "institutional support to build up the skills and expertise that could continue to make them in demand in a quickly changing labour market."
- According to the OECD, they are "particularly exposed to the risks of skills losses, both because they are precluded from the possibility to fully apply their skills at work and due to more limited opportunities of access to formal training or other forms of on-the-job learning. The combination of these two factors makes it more difficult for them to qualify for better jobs."
- At the same time, the companies that depend on these workers the most, SMEs, do not have the resource to provide learning opportunities, cannot compete with chaebols for skilled employees, and are not receiving the same type of government support.
- Some companies are addressing the situation by embarking in partnerships with universities and learning centers to provide lifelong learning support to employees and retrain their own employees instead of hiring new temporary workers.