College-grad unemployment hits 5-year high at 481,000 — while SMEs can't find workers

"Thanks to the KTX high-speed rail, people living in Seoul will come down to Cheonan for work," said an official at a company in Cheonan, South Chungcheong Province. "But below Cheonan, no one from Seoul will go further to find a job unless they're a local. There's an unofficial 'southern limit line' drawn somewhere around Cheonan. At least we're lucky to be in Cheonan."

At a small "root industry" manufacturer in Bucheon, Gyeonggi Province, 20 of the company's 30 employees are foreign workers. The firm, which falls into what is commonly called the "3D" category — dirty, dangerous and difficult — can no longer operate without foreign labor. "On the factory floor, we're just grateful when a Korean even expresses interest in working here," an official at the company said. "Most of the Koreans we have are in their 60s or older. The young foreign workers tend to leave just when they've become useful."

Young people cannot find jobs, and small and medium-sized enterprises cannot find workers. College-graduate unemployment reached 481,000 in the second quarter of this year, the highest in five years, while SMEs reported a shortfall of some 467,000 workers. South Korea's labor market is experiencing a job-seeker shortage and a worker shortage at the same time. Telling young people to "lower their expectations" is no easy answer, either: fewer than one in nine workers at SMEs ever moves up to a large company, and online slang has taken to calling SME positions "joso-gieop" — a sardonic play on "good small company" — to signal how little appeal they hold.

The Ministry of Statistics released employment data Monday through the Korean Statistical Information Service (KOSIS) showing that the number of unemployed college graduates reached 481,000 in the second quarter of this year, up 39,000 from a year earlier. That is the highest figure since the second quarter of 2021 — the height of the COVID-19 pandemic — when the count stood at 521,000. The unemployment rate among college graduates also rose to 3.0 percent, up 0.2 percentage points from the same period last year.

Young people bore the brunt of the unemployment surge. The number of unemployed college graduates in their 20s stood at 179,000, while those in their 30s numbered 130,000 — a combined 309,000, or 64.2 percent of all unemployed college graduates. The unemployment rate among college graduates in their 20s hit 8.3 percent, the highest since 2021. Particularly striking was the number of unemployed people with no work experience whatsoever: 56,000, up 7,000 from a year earlier. It was the first time this figure had risen in a second quarter since 2019 — a seven-year gap. Of that group, 48,000 were in their 20s.

Meanwhile, SMEs are facing a severe labor shortage. According to the Ministry of Employment and Labor's survey on workforce demand by occupation for the first half of 2026, released June 30, businesses estimated they needed roughly 467,000 additional workers to maintain normal operations and production. In the first quarter alone, 96,000 positions went unfilled despite active recruiting efforts.

Small businesses dominate the hiring market. In the first quarter, firms with fewer than 300 employees sought to hire 1,246,000 workers — about 85 percent of the total of roughly 1.46 million. The top reason companies cited for failing to fill positions was the absence of applicants with the required work experience, at 25.8 percent, followed by a lack of candidates with the required education or qualifications, at 18.5 percent.

The leading reason firms cannot fill vacancies — cited by 25.8 percent of respondents — was a lack of applicants with the experience they require, followed by insufficient educational qualifications or credentials at 18.5 percent. The problem, in other words, is not a shortage of jobs in absolute terms but a mismatch at the experience threshold, where young job seekers and employers keep missing each other.

The total number of unfilled positions did fall by 13,000 from a year earlier, dropping below 100,000 for the first time since 2021. But analysts say this reflects companies narrowing their hiring to experienced candidates rather than any easing of the underlying mismatch. As firms increasingly seek ready-made workers rather than training new graduates, the entry path for young people grows narrower still — a deepening vicious cycle.

A survey by the Korea Enterprises Federation of 500 companies with 100 or more employees, conducted earlier this year, found that "job-related work experience" was by far the most important hiring criterion, cited by 67.6 percent of respondents. The dominant hiring trends for this year were "strengthening skills-based recruitment," at 72.2 percent, and "conducting only rolling recruitment with no fixed hiring cycle," at 54.8 percent. The structural squeeze on entry-level positions is becoming entrenched.

There is a structural reason young people hesitate to join SMEs even at the cost of prolonged unemployment. According to the Ministry of Statistics' 2024 job mobility statistics, only 11.8 percent of workers who left SMEs moved on to large companies, while 81.4 percent moved laterally to other SMEs. In the other direction, 56.6 percent of workers who left large companies moved to SMEs — a figure analysts attribute largely to post-retirement re-employment.

Compensation is another major driver of SMEs' hiring difficulties. As of May this year, the average monthly wage at firms with fewer than 300 employees was 3.66 million won ($2,470), just 64 percent of the 5.74 million won paid at firms with 300 or more employees. Because a first job tends to define the entire arc of a career in South Korea, telling young people to lower their sights is not straightforward advice.

The concentration of desirable employers in Seoul and the greater metropolitan area compounds the hiring crisis for regional SMEs. Relocating those companies out of the capital region is equally difficult. In a survey the Korea Federation of SMEs released in February this year, 99.5 percent of 203 metropolitan-area SMEs said they had no plans to relocate outside the region. The most commonly cited reason: existing employees are unwilling to move.