South Korea’s rapid growth in the semiconductor and data center sectors has positioned some of its largest companies, including Samsung Electronics and SK Hynix, among the global leaders in market value, each surpassing $1 trillion. Supported by influential labor unions, workers in these firms have benefited directly from the surge in profits. In May, Samsung reached a profit-sharing agreement with its union that is expected to award employees in its memory chip division an average bonus approaching $400,000. This success has contributed to a generally optimistic outlook on artificial intelligence (AI) within South Korea, where positive sentiment about AI reportedly outweighs skepticism, according to recent polling.

However, these gains have not been evenly distributed across South Korea’s labor market. The country has long grappled with a divide between “insiders” — employees in large, well-protected corporations — and “outsiders,” those working in smaller companies or precarious jobs with less security and lower pay. The advantage seen in major firms like Samsung has not extended to subcontractor employees, who typically face fewer protections.

More concerning is the impact AI is having on youth employment. Research from Jinsu Han and Samil Oh at the Bank of Korea indicates that from 2020 to 2023, approximately 211,000 jobs held by workers aged 15 to 29 disappeared, while employment among workers in their 50s grew by 209,000. The decline in youth employment has been especially significant in AI-exposed industries such as computer programming, publishing, professional services, and information services, with job losses ranging from 8.8 to 23.8 percent.

The economists attribute this decline to a “seniority-biased technological change,” observing that AI is more likely to replace tasks performed by junior workers that rely on standardized, textbook knowledge, whereas it tends to supplement tasks requiring experience, tacit knowledge, and social skills more commonly found among senior employees. This pattern aligns with emerging signs in other countries, such as the United States, but is particularly pronounced in South Korea.

Labor market experts suggest that structural factors contribute to these trends. Jiyeun Chang, senior research fellow at the Korea Labor Institute, notes that strong employment protections for incumbent workers in large companies mean that adjustments to new technology disproportionately affect hiring decisions, making it harder for young people to enter the workforce. Furthermore, an OECD report issued prior to the widespread adoption of ChatGPT highlighted how major corporations have shifted toward more capital- and technology-intensive operations, outsourcing more work, and consequently limiting new employment opportunities for graduates. Smaller companies, in turn, remain trapped in low-productivity cycles, unable to offer competitive wages that attract capable workers.

In response, the South Korean government plans to leverage increased tax revenues from the semiconductor boom to fund a “Future Response Fund.” This initiative aims to support major investment projects, address inequality, and provide employment assistance targeted at people in their twenties and thirties.

Potential policy measures include subsidies to encourage businesses to hire and train young workers who may need time to acquire valuable expertise. Broader reforms might focus on extending social protections, training opportunities, and capital access to “outsiders,” such as the self-employed. Experts suggest that with proper support, South Korea’s technologically adept youth could establish startups harnessing AI innovations, which may eventually challenge the dominance of established corporate giants that currently limit their entry into the labor market.

As South Korea navigates this transition, the evolving dynamics of AI and labor underscore the need for adaptive policies that foster inclusion and opportunity for younger workers in a rapidly changing economy.