An analysis said that keeping the jobless rate low even amid an economic slowdown does not necessarily indicate a "strong labor market." It said a distortion is occurring in which the unemployment rate appears low as more young people give up looking for work and the efficiency of job matching between openings and seekers improves.
Korea Development Institute (KDI) released a report on Feb. 6 titled "Causes and implications of the recent low unemployment rate," diagnosing that "even though the economic growth rate began to slow in 2021, the fact that the unemployment rate remains low suggests that structural changes have occurred in the labor market."
According to the report, the share of the population "resting" out of the working-age population has steadily increased from 3.2% (1.23 million people) in 2005 to 5.6% (2.54 million people) in 2025. In particular, the share of people in their 20s who are "resting" doubled over the same period, from 3.6% to 7.2%.
KDI said, "Even though the working-age population in their 20s has decreased by 17%, the number of people who are 'resting' has increased by 64%," adding, "This shows that the willingness of the working-age population, especially the young, to participate in the labor market is weakening."
Amid limited capacity to create quality jobs due to a slowdown in the potential growth rate, the deepening dual structure of the labor market has intensified competition for regular positions, which was cited as one reason. In fact, in 2024, 30.9% of people in their 20s who were "resting" responded that they were "taking a break because it is difficult to find the job they want."
Improved efficiency in job matching between openings and seekers is also analyzed to have contributed to the drop in the jobless rate. KDI's estimates confirmed that between 2015 and 2025, matching efficiency improved by about 11% with the spread of digital hiring platforms and the adoption of artificial intelligence (AI)-based matching technology.
If new hires numbered 100 in the past when the number of job seekers and job postings was the same, the figure is now 111. Accordingly, the share of job searches conducted through public and private job placement agencies expanded from 32% in 2015 to 71% in 2025.
KDI judged that without structural changes in the labor market—such as job searching being abandoned by people in their 20s and improvements in matching efficiency—the unemployment rate in 2025 would be at least 0.6 percentage points higher than the current 2.7%.
Research fellow Kim Ji-yeon said, "We confirmed that a low unemployment rate does not necessarily mean an improvement in employment conditions," adding, "If an economic structure that dampens young people's motivation to seek jobs becomes entrenched, even the utilization of human resources, which is already shrinking, could decline, and it could also hinder social cohesion."
She added, "While continuing to raise matching efficiency, it is necessary to simultaneously work to ease the labor market's dual structure to strengthen incentives for labor market participation."