South Korea boosts entrepreneurship to ease youth unemployment

Promoting entrepreneurship has emerged as a central policy priority for the South Korean government. The Ministry of SMEs and Startups said it will begin accepting applicants through its “Startup for All” platform on March 26, aiming to identify 5,000 prospective founders nationwide and provide them with funding to launch businesses. The initiative will also include a startup competition program and offer participants career certification even if their ventures do not succeed.

The push reflects a growing recognition that relying solely on existing companies to expand hiring will not be enough to address employment challenges, particularly for young people. At a National Entrepreneurship Strategy Meeting held at the presidential office in late January, the government underscored a shift in its employment approach from job-seeking to job creation.

Youth unemployment continues to weigh on the labor market. Data from Statistics Korea show that the number of employed people aged 25 to 29 fell to 2.346 million in February, down 62,000 from a year earlier. The employment rate for this group stood at 70.4 percent, the lowest for February in four years. The broader youth unemployment rate for those aged 15 to 29 reached 7.7 percent, the highest since June 2021.

Small and medium-sized enterprises, however, view the government’s startup push with mixed feelings. Many SMEs, which underpin the South Korean economy, continue to grapple with persistent labor shortages. A recent survey by the Korea Federation of SMEs, covering 1,223 companies, found that 82.6 percent had hired foreign workers due to difficulties in recruiting local staff.

Some observers say perceptions that young job seekers avoid SMEs have eased. A January report by the Bank of Korea found that unemployed young people expect an average annual salary of about 31 million won, roughly in line with the 32 million won average starting salary for high school graduates at mid-sized companies in 2023. The report also showed that 48.0 percent of respondents preferred SMEs as employers, compared with 17.6 percent for large corporations and 19.9 percent for public institutions. The findings suggest a sizable pool of young workers willing to enter the labor market through SMEs. A company official said policy discussions on labor shortages have received less attention as entrepreneurship gains prominence on the national agenda.

SMEs continue to raise concerns about the full implementation of the 52-hour workweek, calling for greater flexibility to make better use of their existing workforce. They have also expressed concern over moves by the government and the ruling Democratic Party of Korea to shorten the required three-year period before foreign workers can change workplaces, warning that such changes could complicate efforts to retain skilled labor in manufacturing. A program aimed at encouraging youth employment in SMEs, known as the Tomorrow Filling Deduction, expired in 2024 and has only recently been revisited for possible reinstatement.

While promoting entrepreneurship and developing a startup-driven economy remain important national goals, experts say support for small and medium-sized enterprises must advance alongside these efforts. Easing regulations and enhancing hiring incentives will be essential. Tackling youth unemployment will require a balanced approach that encourages both new business creation and job growth within existing companies.