Sarah O’Connor
From a distance, South Korea looks like one of the clearest winners from the AI boom. Its chipmakers are riding the surge in demand for semiconductors and data centres. Samsung Electronics and SK Hynix have reached extraordinary valuations, and strong unions mean some workers are sharing directly in the gains.
That success is real. But it is not the whole story.
South Korea has long had a divided labour market: secure “insiders” in large, productive companies on one side, and less protected “outsiders” in small and medium-sized firms on the other. The early benefits of AI appear to be flowing along those same old faultlines — and, in some cases, deepening them.
Samsung’s profit-sharing deal, for example, may deliver huge bonuses to workers in its memory chip division. But it does not extend to the subcontracted workers who often have lower pay and weaker protections. The AI boom is lifting some boats much faster than others.
The more worrying group is young people who have not yet managed to enter the labour market at all. A study by Jinsu Han and Samil Oh of the Bank of Korea found that South Korea lost 211,000 jobs for people aged 15 to 29 over the past 3 years. Over the same period, employment for workers in their fifties rose by 209,000.
The pattern is sharpest in sectors most exposed to AI. Youth employment fell 11.2% in computer programming, system integration and management, 20.4% in publishing, 8.8% in professional services and 23.8% in information services.
The economists describe this as a “seniority-biased technological change”. AI is better at replacing tasks usually given to junior workers: codified work, textbook knowledge, routine analysis and entry-level production. Senior workers, by contrast, often rely more on tacit knowledge, judgement, networks and interpersonal skills. AI is more likely to augment those abilities than replace them.
That is the danger. AI may not simply remove jobs. It may remove the first rung of the career ladder.
There are signs of a similar pattern in the US, especially in software. But South Korea’s case is particularly stark because its labour market was already tilted toward insiders. Incumbent workers in big companies enjoy strong job protections. When firms adopt new technology, the adjustment often falls not on existing employees, but on hiring. Young people trying to get in are the easiest group to exclude.
This was a problem before ChatGPT arrived. The OECD warned in 2022 that South Korea’s large companies were already becoming more capital- and technology-intensive, while relying more on outsourcing. Graduates who failed to enter big companies or the public sector often waited for another chance rather than take jobs at smaller firms. Those smaller companies, meanwhile, were trapped: too unproductive to pay well, and therefore unable to attract the talent needed to become more productive.
AI did not create this insider-outsider divide. But it could harden it.
The good news is that South Korea has room to act. The semiconductor boom is bringing in tax revenues, and the government is planning a “Future Response Fund” to invest in major projects, reduce inequality and support employment for people in their twenties and thirties.
One obvious use of that money would be to help companies hire and train young workers, even when their value is not immediately monetisable. Experience has to be built somewhere. If firms no longer want to pay for the apprenticeship stage, governments may need to help keep that pathway open.
A more ambitious agenda would extend security, training and capital to outsiders too: the self-employed, workers in smaller firms and young people with the skills to build companies of their own. In the right conditions, South Korea’s tech-savvy youth could use AI not only to seek jobs, but to create new businesses — perhaps even ones that challenge the corporate giants that kept them outside.
That is the lesson beyond South Korea. The test for AI policy is not only whether the technology raises productivity or enriches national champions. It is whether young people still get a way into the economy it creates.
New eras need new mantras. For young people shut out of the old hiring routes, one may become unavoidable: if you can’t join them, beat them.
Source: Financial Times, Sarah O’Connor.