Korea Research
Institute for Vocational Education and Training
Skills Development Policies for a Flexible and Secure Labor Market
Chapter 03
RYU Kirak (Ph.D., Head, Employment, Skills Development,
and Qualifications Research Division)
The content does not necessarily reflect the official views of the KRIVET.
Chapter
3 Skills Development Policies for a Flexible and Secure Labor Market
RYU Kirak(Ph.D., Head, Employment, Skills Development, and Qualifications Research Division)
Section 1 Current Issues
Skills development policies include programs and strategies that aim to develop, apply, and actualize certain forms of human capacity or capabilities needed to live in a changing society. These policies encompass the whole breadth of government measures a country’s citizen will experience during his or her lifetime. For such policies to be effectively delivered, an accurate assessment of the types of capabilities demanded by the changing world of the 21st century has to be performed, and the results made accessible to those on the frontlines of education and training, the labor market, and even for the average person in his or her daily life. Additionally, we need to build a knowledge-sharing platform and policy infrastructure to keep monitoring for signals which inform us about what types of policy efforts are required for developing and maintaining the skillsets sought after in this changing world undergoing digital transformation and a carbon-neutral economy.
Skills development policies need to drive stakeholder engagement from across the government and society by formulating their strategies upon a foundation built using quantitative evidence and qualitative monitoring and evaluation programs. The fate of a skills development policy will depend on the quality of the comprehensive framework that assigns and coordinates the different roles and attendant authority amongst the government bodies, between the central and regional governments, including how these efforts will be financed and how the services will be ultimately delivered.
What indeed is the core theme of skills development policy, and what should be its objective? Within this Chapter, this core theme is personal capabilities or skills.
Having the appropriate skills is critical to processing, understanding, and analyzing text-based information or mathematical information. These skills are defined as the complete set of capabilities – knowledge, technical ability, comportment – required to fully participate in the labor market, education and training, and civic society.
Skills in this context refer to skills relevant for social settings and work environments that are universally recognized, can be learned, and are impacted by government policies. (OECD, 2013a; Ryu Kirak, 2016).
The objective of skills development policies is to proactively engage with the changes brought on by digital transformation and the changing environment to help enhance every citizen’s individual capabilities and skills, thereby securing a growth engine for the society of the future and driving social cohesion. As is widely recognized, the sustained economic rise Korea experienced in the past was possible because of aggressive investment in and generous support for education. However, we have now moved past industrialization and the IT-based growth phase and are living in a period marked by digital transformation, a knowledge-based economy, and deindustrialization which are all demanding a new type of human capital and skills in order to thrive in the face of rapid technological advances, globalization, and social changes. In terms of policy scope, skills development needs to establish a position that cuts across various dimensions and segments that comprise skills development as experienced by an individual throughout his or her lifetime when pursuing skills development, application, and actualization, and searching for programs that support such enhancement.
Skills development policies incorporate aspects of both social policies and labor market policies. Therefore the design of skills development policies has to be grounded upon a thorough understanding of the needs and preferences for social policies and the relevant trends so as to properly incorporate this information.
Investing in human resources occurs at every stage in a person’s lifecycle, though research shows that the involvement levels experienced during infancy, childhood, and school age determine whether or not the cumulative effects accrued across a
lifespan are positive or not. Of particular note is the close correlation between the level of investment enabling human resource development and the various areas of social policies such as socioeconomic backgrounds of the parents, the extent of private/social support available for childcare and child rearing, national investment into public childcare and public education, etc. (Esping-Andersen, 2009).
With which social changes should skills development policies proactively engage with? Table (3-1) presents major aspects of social change and whether or not these risks demand proactive engagement by the government. As an active labor market policy, skills development has mainly been a response to the need for job-to-job changes arising from loss of employment. However, the demand for skills development and upskilling has been growing as the rise and fall cycle of required skillsets revolve more quickly due to technological advances and digital transformation. As such, the role skills development policies play when helping people maintain and enhance their individual capabilities and skills across a lifetime is becoming increasingly larger as education and training needs grow in response to the times.
Social Change New Social Risk Government Response Previous skills no longer viable as technology
advances and digital transformation continues. Different job skills
needed Expand education and training Women’s need to balance work and life as more
women enter the labor market (more women with higher education degrees, etc.)
Need to balance work
and life Promote work-life balance policies Greater labor market insecurity Greater job insecurity Reinforce job security Demographic changes (low fertility, aging society,
etc.) Rising senior poverty Strengthen social
safety net
<Table 3-1> Social Changes and Response Measures
Source : Ryu, et al. (2020: 47) (Partially modified)
When examining labor market participation, more women are receiving higher education degrees and entering the labor market which is changing tradition gender roles established by the past nuclear family models, resulting in increased demand for work-life balance. Skills development programs also need to change to organically tie together childcare and job skills development. Further, as labor market insecurity dovetails with technology-driven structural changes and “platform capitalism,”
employment practices are also rapidly changing, resulting in growing job insecurity. As more people demand job security, skills development policies have to come up with measures to meet such demands. Finally, there is a sharp increase in senior poverty stemming from demographic changes such as low fertility and an aging society. In response to these risk factors, a stronger social security net needs to be put in place, in addition to meeting an ever growing need for skills development to operate in sync with social security programs.
Part 2 will examine the current state of skills development policies in Korea and their issues. Assessments will be made using statistical data published by the OECD, and status reports published by government-funded job programs, to identify unique traits and the design of Korea’s skills development policies. Part 3 reviews the problems of Korea’s labor market duality and presents a way forward for establishing a system for building a more inclusive labor. In Part 4, a discourse is presented regarding the impact of skills development policies as a response to the threat of automation and the changes brought on by digital transformation. More specifically, important predictive points are made about the challenges that digital transformation pose for skills development policies, automation and its risks, which will be informative for policy design in skills development. In Part 5, an argument is made for redefining skills development policies so that they may serve as a bridge between labor market policies and social policies. Specific policy tasks are also defined. Lastly, Part 6 will briefly summarize the overall discourse.
Section 2 The Current State of Skills Development Policies and Their Issues
Earlier, skills development policies were defined as follows : A government’s skills development policies include programs and strategies that aim to develop, apply, and actualize certain forms of human capacity or capabilities needed to live in a changing society. These policies encompass the whole breadth of government measures a country’s citizen will experience during his or her lifetime. However, it is difficult to find a consistent definition or a consensus on the scope, objective, and policy users of actual skills development policies. It is precisely these issues that make so difficult an accurate determination of the number of potential policy users and the budget. In the following paragraphs, the size of Korea’s government-funded job program and the statistical data from OECD will be utilized as part of an effort to examine the current state of and main issues in skills development policies.
1. Active Labor Market Policies in Korea Today : Low Spending and High Proportion of Direct Job Creation Policies
Labor market policies comprise of passive and active labor market policies. The former involves income compensation for unemployment, and the latter is about enabling employment maintenance and supporting skills development. Specific measures incorporated by passive labor market policies include full unemployment benefits (unemployment insurance, unemployment assistance), partial unemployment benefits, part-time worker unemployment benefits, layoff compensation, bankruptcy compensation, and early retirement support. While for active labor market policies, there are public employment services (job placement and related services, administrative guidance for receiving unemployment benefits, etc.), vocational training, employment incentives (hiring, employment maintenance, job rotation and job sharing), employment subsidies, self-sufficiency programs, direct job creation, start-up incentives, etc. Korea’s active labor market policy (ALMP) spending in 2018 was 0.36% of the GDP, which is below the OECD average of 0.48%. While spending
in public employment services and vocational training remains more or less the same or has grown only slightly, for an extended period of time direct job creation has continued to account for more than half of the spending.
2. Improving Short-Term Employment Rate and Employment-First
What is the outcome of skills development and training? It must be noted that the outcome is determined by the employment rate in the labor market and the job quality. The proportion of low income jobs (earning less than two-thirds of the median income) is shrinking as a result of the decision by the Moon Jae-in administration to raise minimum wages and pursue an income-driven growth strategy. According to the data published in the Employment and Labor Report by the Ministry of Employment and Labor (MOEL), 25.5% of jobs in 2008 were low-income jobs, which in 2018 has been reduced to 19.0%, which is still rather high when compared to the OECD 2017 average of 15.7%.
The Tomorrow Learning Card Program which provides individual tailored training for unemployed individuals still mainly delivers training that are short programs in the service sector. Though the employment outcome has remained the same for a while, the numbers recorded six moths after end of training has improved from 35.0%
in 2011 to 52.6% in 2018, despite the overall improvement trend rising somewhat slowly. The National Strategic Industry Job Training Program has stagnated recently, with 2011 posting 73.5% employment, and 2018 dropping to 65.7%.
3. The Current State of Employer-Provided Training and On-the-Job Training
Employer-Provided Training accounts for the highest percentage in spending for job training. In Table (3-2), there is a comparison of budget spent and the number of people who participated in the training by program types. The total amount is more than 1.35 trillion won with over 2.93 million participants. Of these numbers, On-the-Job Training represents the biggest portion with over 2.47 million people and
594.8 billion won. Training for Unemployed Individuals reported 431 thousand trainees with 698.3 billion won, which represents 51.4% of total spending. In the On-the-Job Training category, Employer-Provided Training saw more than 2.05 million participants with 205.3 billion won. The Work-Study Dual System had 34 thousand participants with a spending of 146.2 billion won.
4. Major Indicators of the Current State of Training for the Unemployed
The Tomorrow Learning Card Program and the National Strategic Industry Job Training Program are the main programs delivered through Training for Unemployed Individuals. The former was first introduced in 2009 to deliver training based on the actual needs of each individual and to enhance training quality by creating competition between the training service providers. However the result was an over-representation of a certain few training types in the portfolio of training services provided through the program. From the middle of the 2010s onward, the adoption of training consultation and designated individual accounts has led to a steady decline in the volume of training administered through this program. The over-representation issue is also showing improvement.
The National Strategic Industry Job Training Program aims to resolve the gap between the job skills required by the strategic industries and the skillsets held by job-seekers, and to develop new talent for these industries. The latest trend is to focus on training for emerging technologies and new industries. Efforts to reinvent the program include programs to nurture a highly-skilled workforce for specific sectors and building curriculum tailored for specific businesses. The outcome of this program is comparatively good as the program has been able to rapidly respond to changing demands on training methods and the demands of the trainees. Though the number of participants is small, the program’s meaning is significant as it focuses on delivering high quality training over the longer-term, thereby accounting for 56.2%
of the budget for Training for Unemployed Individuals.
The K-Digital Training component of the National Strategic Industry Job Training Program receiving much attention lately as it is dedicated to providing tech skills
training for emerging digital technologies to nurture talent who are ready from day one on the job. K-Digital Training operates various sub-programs for a variety of job types, including job placement support and vocational training so as to help increase access to job opportunities in tech and emerging digital sectors. In 2021, K-Digital Training is aiming to train a total of 110 thousand young job-seekers (60 thousand more than initially planned) so as to help mediate tech job opportunities for young people seeking employment in the IT sector. Greater resources are being invested in K-Digital Training and also K-Digital Credit (training to acquire basic tech skills) to training an additional 23 thousand young job-seekers using a budget of about 57.4 billion won.
Section 3 Labor Market Duality and Inclusivity in the Labor Market
The polarization of job quality in the Korean labor market can be considered a factor that reduces participation in skills development programs, deters fair compensation based on job performance and capabilities, and disrupts healthy movement of labor. While the positive cycle of new recruit onboarding, promotion, and upskilling that takes place inside a company is faltering, the economy’s transition to an “As-A-Service” model and the resulting polarization of job quality is posing as an additional challenge to skills development policies. The next few paragraphs will first examine these polarization trends by tracking changes in job numbers for each skills level, and the relative difference between job quality of each employment type.
Following these discussions, the tasks left behind by the COVID-19 pandemic and the need for building a system of promoting inclusivity in the post-pandemic labor market will also be touched on.
1. Polarization Trends in Job Quality
Polarization in the labor market mainly means a hollowing-out in the middle of the spectrum of job quality, while the two extreme ends grow. When we remember that income and skills levels are the major indicators of job quality, the phenomenon we
observe where these indicators appear polarized point to a duality existing in the labor market. Further, when we also recall that traditional vocational training taught skillsets for the middle of the job quality spectrum, then we have to recognize that skills development policies need to change their objectives and policy direction significantly in response to job quality polarization.
2. Inclusion in the Post-Pandemic Labor Market
If the structural changes resulting from digital transformation and globalization shocked the architecture of Korea’s labor market, then the pandemic is threatening to disrupt the natural progress of the labor market. The employment crisis brought on by the pandemic deserves special recognition as it is unfolding in a manner that is different from the recession experienced in the wake of the global financial crisis.
Whereas the financial crises of the past presented a massive shock to the male workforce and the core segment of workers typically employed in the manufacturing sector, this pandemic is a growing threat to jobs in the service sector and to women and the younger age group in particular.
According to the 2020 research by Adams and Prassl, when observing the job loss experienced by individuals employed in paid work in the labor markets of the US, the UK, and Germany during the month of April, 2020 – when the spread of COVID-19 started impacting employment in earnest – in all three nations the threat of unemployment experienced was different according to employment type, salary status, and work hours arrangement. Especially in the US and the UK, temporary workers risked unemployment at a rate 10 to 20 percentage points higher than regular workers. The same asymmetry appeared when comparing un-salaried workers to salaried workers, and between contractors working varied hours and full-time employees. On the other hand, Germany showed an overall low risk of job loss at about 10%, and the discrepancy between the salaried and the un-salaried, and the full-time work hours and the varied work hours was not great.
What is the cause of this difference between the nations? It depends on whether or not the nation had a system that enables inclusivity in the labor market. As many
of us know, workers in Germany utilized coordinated collective bargaining to activate strategies such as short-time work to spread the shock of external factors across many actors in the labor market, thereby overcoming the crisis. On the other hand, the US and the UK who work in a system determined by neoliberalism and the free market economy, the marked tendency was to utilize mass layoffs to overcome the crisis.
Due to the polarization in the labor market and the lack of inclusivity measures, pandemic shockwaves are spreading through the Korean economy in a manner similar to what we are observing in the economies led by the UK and the US (Acemoglu & Robinson, 2019; Robinson & Acemoglu, 2012).
3. Flexibility and Security in the Labor Market
How are the levels of flexibility and security in the Korean labor market? Though there are various indicators of its security, the average number of years of continued work is a globally comparable indicator. In Diagram (3-7), between 2016 and 2020, Korean workers on average were employed continuously for about 5.8 to 6.0 years.
This is lower than other comparable economies, and also represent the weakest indicator of the labor market’s security. Countries of continental Europe such as France and Germany, and nations in southern Europe such as Greece, Portugal, and Spain show the longest continued years of employment. On the other hand, northern European nations such as Denmark and Sweden, and also Ireland report comparatively shorter years.
The OECD average initial income replacement ratio is 58%, and 29% for long-term unemployment. Korea reports 54% and 21%, showing a very steep drop in income replacement in the long-term. Korea’s labor market programs and its supportive systems cannot be described as secure at all in terms of income replace ratio for the unemployed.
Section 4 Skills Development Policies Preparing for Digital Transformation and Threat of Automation
There is great concern about the disappearance of medium skill level jobs with the continuing digital transformation and the growth of platform capitalism. However, the argument that the technological transformations stemming from the past industrial revolutions actually created more jobs seems persuasive. Though there still is concern that AI and knowledge-powered technology will bring about a change that is qualitatively different from the previous industrial revolutions, the actual changes in jobs can sufficiently be modified through a political and social process.
What commands the greatest attention in the changes to the employment practices caused by the digital transformation is the polarization of job quality and the increasing duality of the labor market. Korea Research Institute for Vocational Education & Training (KRIVET) observes that the polarization in job quality is appearing to the same extent in the job training market in terms of response to automation of jobs (Ryu, et al., 2017).
Digital transformation has already established itself as the main driver of change in future work, and a major cause of social inequality within and outside of the labor market. Skills development policies are face with a great challenge as the trends of inequality continue to persist or increase in the process of developing, applying, and actualizing the individual capabilities or core information processing capacity throughout a person’s entire lifetime.
OECD’s analysis (OECD, 2019c) of the threat of job automation in its major economies identifies for us a very important guidepost when designing relevant policies. 14% of jobs in OECD nations are faced with a significant (70% or higher) risk of automation, and a U-shaped curve emerges when the demographic data is plotted against automation probability. The age group of 30 to 35 is the least threatened by job automation, while this risk rises from the next age group onward. Automation is a greater threat to the younger generation than those middle-aged and older (early-retirement policies). Policies to support younger unemployed individuals, such
as re-skilling and re-qualification can be a key enabler of movement from a high automation risk job to a low risk one. In Germany about 40% of workers go through re-qualification in their working lifetime, and they aim for jobs with low automation risk when training for their second career. A separate dedicated program that is designed to respond to automation risks for so-called “old jobs” is needed.
Section 5 Conclusion
In this Chapter we defined skills development policies as follows : A government’s skills development policies include programs and strategies that aim to develop, apply, and actualize certain forms of human capacity or capabilities needed to live in a changing society. These policies encompass the whole breadth of government measures a country’s citizen will experience during his or her lifetime. It was therefore emphasized that such skills development programs need to serve as a bridge between social policies and labor market policies and so formulate a proactive stance in preparing for new challenges to society. Through this lens, KRIVET has delivered an overarching narrative on the state of and the current issues surrounding Korea’s skills development strategies. Through this, the Institute has underlined the need for expanding the nation’s active labor market policies, reducing the proportion of direct job creation strategies, and coordinating and integrating employment services and skills training.
With the risk of increased inequality due to digital transformation and duality in the labor market still persisting, a thorough analysis of the automation risk faced by jobs in creating future skills development policies will greatly enable the establishment of an inclusive labor market.
In closing, we propose eight policy tasks. First, establish skills development policies as a bridge between social policies and labor market policies for the management of newly emerging social risks. Second, build “flexicurity” into the Korean labor market through enhancing and modernizing skills training programs, and integrating lifelong learning and lifelong skills development. Third, re-design the structure of the nation’s active labor market policies to increase investment into job placement and vocational
training. Fourth, strengthen the social security net for employment security by designing a contribution system for employment insurance based on income and thereby improve coherence between policy measures. Fifth, combine skills development programs with workplace innovation measures to bring about shorter hours and a smarter work system. Sixth, innovate the workplace environment through measures that devolve power to individuals, promote self-determination, and encourage networking so as to make the digital transformation beneficial to skills development and all levels. Seventh, build an early-warning system for employment crises and attendant emergency support programs to strengthen the responsiveness of skills development policies. The eighth and final task recommendation is to create a foundation for skills development policies to be conducive of work-life balance by expanding eligibility for paid-leave and paid training benefits.
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Date published December 31, 2021
Printing Decmber 2021
Published by Korea Research Institute for Vocational Education and Training(KRIVET) Publisher Jang-soo Ryu
Production Manager HwaChoon Park
Author RYU Kirak
Address Social Policy Building, Sejong National Research Complex, 370 Sicheong-daero, Sejong-si, South Korea 30147
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Phone 82-(0)44-415-5000
Registration date 1998.6.11.
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