Korea’s Real Jobs Problem Isn’t AI

Editor’s note: This column appeared in the South Korean publication the Chosun Ilbo and is published here in English with permission.

Around the world, anxiety is rising that artificial intelligence will eliminate jobs. But in South Korea, the more immediate concern is not jobs disappearing because of AI. It is that too few high-quality jobs exist in the first place.

So-called “large-firm jobs” in Korea—positions associated with higher wages, stronger benefits, and clearer career ladders—account for just 13.9 percent of total employment. That is the lowest share among 32 OECD countries and less than half the OECD average of 32.2 percent. In the United States, the figure is 57.6 percent. In Germany and Japan, it exceeds 40 percent.

The wage structure reflects this imbalance. Workers in firms with 5 to 9 employees earn roughly 54 percent of what employees at firms with 300 or more workers earn. Even mid-sized firms with 100 to 299 employees pay only about 71 percent of large-firm wages. A labor market dominated by small enterprises produces persistent gaps in income, benefits, and long-term career opportunities.

Few young people aspire to work in small firms. Yet public policy has long prioritized protecting them. Korea has built thousands of support programs around firm size: industry protection lists reserving sectors for small businesses, public procurement quotas favoring smaller firms, and tax credits and subsidies tied explicitly to remaining below certain size thresholds. As firms grow, regulatory and administrative burdens increase. The system effectively rewards remaining small.

Over time, businesses have adapted. Companies with limited growth potential survive longer than market conditions would otherwise allow. Meanwhile, ambitious small firms hesitate to scale up, wary of losing support or triggering heavier compliance obligations. The result is a structural bias against firm expansion.

This distortion has broader consequences. Korea ranks near the top of the OECD in tertiary education attainment among 25–34-year-olds, yet many graduates work in positions that do not require a university degree or offer limited wages and career prospects. OECD data also show that Korea’s rate of overqualification is well above the OECD average. Underemployment and weak wage prospects contribute to delayed marriage and childbirth, exacerbating Korea’s demographic decline.

The solution is not more protection for small businesses. It is enabling them to grow. Support and regulation should be redesigned around performance, productivity, and job quality—not firm size. Companies that expand, raise wages, and provide stable employment should be rewarded, not penalized.

In low-productivity service sectors such as food service and private education, policymakers should encourage consolidation and platform integration to achieve economies of scale. Korea also needs a modern labor framework suited to a dynamic economy: flexible hiring and separation rules, stronger transition support for displaced workers, and lifelong learning systems tied to real labor market outcomes.

South Korea possesses one of the most educated workforces in the world. Yet its policy framework traps too much of that talent in firms that cannot grow or scale. An innovation-driven economy cannot be built on micro-enterprises or on labor rules designed for a bygone era of lifetime employment and family-run businesses.

If Korea wants stronger growth and a reversal of demographic decline, it must shift from protecting smallness to enabling scale. The future will not be built by firms that are incentivized to remain small.

It will be built by firms that are not punished for growing and ideally are encouraged to expand.