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Abstract

This study aims to investigate the mediating effect of self-esteem in the path from the burden of debt to job-search behavior among South-Korean low-income youths under a economic recession. Using data from the Second Panel Study on the Participants of the Youth Hope Growing Account (YHGA) program in Korea, this study tested a theoretical model using structural equation modeling (SEM) with maximum likelihood (ML) estimation. The mediation effect was estimated using bootstrapping. The results revealed a significant effect of debt burden on job-search behavior, which was fully mediated by self-esteem. These findings suggest the necessity of providing financial and psychological support for economically disadvantaged youth to facilitate successful entry into the labor market in South Korea.

Plain Language Summary

Study about the relationship between job-search behavior, burden of debt, and self-esteem among South Korean youths in poverty

Youth in South Korea face multidimensional difficulties encompassing economic, psychological, and social aspects, driven by high unemployment rates and insecure employment statuses. Youth from low-income backgrounds often endure precarious low-wage jobs without resources or time to prepare for better employment, perpetuating the cycle of poverty. Given these circumstances, it is crucial for youth to persist in job-search behaviors, with psychological resilience playing a vital role in navigating challenging circumstances. This study aims to examine the impact of debt burden as an indicator of economic hardship on job-search behavior and the mediating role of self-esteem. The study found that the burden of debt is negatively associated with self-esteem and self-esteem fully mediates the relationship between the burden of debt and job-search behavior. It means that burden of debt does not have a direct significant impact on job-search behavior since it has a significant impact on self-esteem, which also has a significant impact on job-search behavior. Therefore, interventions to improve the self-esteem of impoverished youths are demanded, considering that the self-esteem is important factor for the youths. In this respect, psychological or counseling programs for enhancing the self-esteem and psychological well-being of young people should be provided in both universities and local communities. Policies such as debt reduction and housing support might be helpful for the disadvantaged youths from low-income families in terms of increasing their disposable income and reducing economic hardship.

Keywords

burden of debt self-esteem job-search behavior low-income youths disadvantaged youths

Introduction

The past 2 years have brought significant changes to our lives due to the COVID-19 pandemic, particularly impacting youth and the labor market. The International Labor Organization (ILO, 2020) predicted that the global unemployment rate and income loss caused by COVID-19 would surpass those of the global financial crisis, with young people being particularly affected. In South Korea, young people have emerged as a vulnerable group amidst prolonged economic recession, labor market challenges, and dualization since the late 2000s (Anonymous et al., 2019).

Youth in South Korea face multidimensional difficulties encompassing economic, psychological, and social aspects, driven by high unemployment rates and insecure employment statuses (Anonymous et al., 2019). Globally, young workers aged 15 to 24 experienced more job losses than middle-aged workers during COVID-19 (ILO, 2021), and South Korea’s youth unemployment rate has remained above 20% since 2020 (Korean Statistics Office, 2020, 2021, 2022), with 1 in 4 to 5 youths unemployed. Furthermore, the number of youth giving up job searches reached an all-time high in 2021, with more than half in their 20s and 30s (Korean Statistics Office, 2021). This means that the number of young people who give up getting a job has increased in a situation where companies are reducing new recruitment due to COVID-19 and the economic recession. The government implemented lockdowns to curb the spread of COVID-19, which causes decline in consumer spending and revenue decline and high unemployment and job losses in many sectors such as tourism and hospitality (J. Kim, 2015). The young people who give up looking for jobs are more likely to experience career gap, which leads to the low level of earned income and job instability in their later lives and can be a social burden to the society.

The rise in unemployment has led to economic hardship and increased debt among youth in South Korea (Baek, 2021). By the end of 2020, youth debt had surged in terms of loan-to-asset (LTA) and loan-to-income (LTI) ratios, while loan-to-savings (LTS) decreased significantly (Bank of Korea, 2020).

Even youth from financially stable families face challenges, but they have better opportunities to secure decent jobs by enhancing their competitiveness. In contrast, youth from low-income backgrounds often endure precarious low-wage jobs without resources or time to prepare for better employment, perpetuating the cycle of poverty (Anonymous, 2020; Anonymous & Joo, 2020, 2021). Despite prolonged difficulties, the social safety net for young people in Korea remains weak, as they are traditionally expected to be self-sufficient without welfare assistance under the dominant neoliberal ideology.

Given these circumstances, it is crucial for youth to persist in job-search behaviors, with psychological resilience playing a vital role in navigating challenging circumstances. This study aims to examine the impact of debt burden as an indicator of economic hardship on job-search behavior and the mediating role of self-esteem. Self-esteem is hypothesized to mediate the relationship between economic hardship and job-search behavior, as it is integral for success and resilience in adverse conditions (Baumeister, 1993; Cast & Burke, 2002; Graffman et al., 2004; Kenemore & Roldan, 2005; Orth & Robins, 2014; Smelser, 1989).

Literature Review

Disadvantaged youths from low-income families generally have low levels of education and often work in insecure, low-income, and low-skilled jobs in the labor market. Additionally, they lack the resources to develop human capital (T. Kim et al., 2012; S. Lee, 2008; Yeo et al., 2007), which can lead them into poverty and diminish their motivation to improve their situation.

Recently, factors such as unemployment, low-wage jobs, inflation, high living costs, and high interest rates have been rapidly increasing the debt of young people in South Korea (Baek, 2021; S. Park, 2022). Youth debt often begins with student loans, but difficulty in securing decent employment makes it challenging to repay debts. Consequently, additional loans are taken out to cover living expenses while searching for jobs after graduation, a scenario more common among youths from low-income families (Byeon, 2019; Ha et al., 2020; J. M. Park et al., 2018).

Research indicates that youth debt is influenced by various factors such as socio-economic (T. Kim & Kang, 2020; S. Park, 2022), family, and individual factors (Jang, 2018; J. M. Park et al., 2018). Furthermore, debt can affect psychological well-being (Dwyer et al., 2011; Ha et al., 2020; S. Lee & Lee, 2016) and success in the labor market (Y. Lee & Lee, 2020).

Job-search behavior is crucial for success and career decision-making in the labor market. Numerous factors, including financial conditions and psychological strength, have been identified to affect job-search behavior (Blau, 1994; Boudreau et al., 2001; Bretz et al., 1994; Hooft et al., 2005; Schwab et al., 1987).

Conflicting results exist regarding the relationship between financial situation and job-search behavior. While some studies (Hausdorf, 2007; Schwab et al., 1987; Wanberg et al., 1996) suggest that individuals intensify job-search efforts during financial difficulties, others (Basyouni et al., 2021; Ji, 2021) indicate that economic hardship may lead to psychological instability or increased hours in low-paid jobs, resulting in weakened job-search behaviors.

This research targets disadvantaged youths from low-income families. Given the characteristics of this group, it is assumed that those with higher debt burden may have less time for job-search activities as they are more likely to work longer hours in temporary or insecure jobs (Froidevaux et al., 2020).

Economic hardship has been shown to negatively impact youths psychologically, leading to decreased self-esteem and increased anxiety and depression (Lange & Byrd, 1998; Roberts et al., 2000). Psychological strength, particularly self-esteem, plays a crucial role in overcoming difficult situations and moving forward. Therefore, this research focuses on the mediating role of self-esteem in the relationship between economic hardship and job-search behavior. Studies consistently highlight the importance of psychological strengths in achieving career-related success, with self-esteem being empirically proven to have a positive impact on vocational identity, career maturity, career decision-making, and job-search behavior (Creed et al., 2001; Emmanuelle, 2009; Lim & You, 2019; Munson, 1992; Saks & Ashforth, 2000; Schwab et al., 1987).

In recent years, a growing number of young people in South Korea have opted out of job seeking (Korean Statistics Office, 2020, 2021, 2022) due to declining opportunities for decent employment and increasing unemployment in the labor market. This trend can negatively impact individual career paths and pose a burden on society, necessitating greater social concern.

In this regard, this study investigates the power of psychological strength of the disadvantaged youths in the path to job-search behaviors. We hypothesize that self-esteem mediates the effect of the burden of debt on job-search behavior. The following are the specific hypotheses to be tested in this study:

H1: The disadvantaged youths from low-income families with higher burden of debt exhibit less job-search behaviors.

H2: The disadvantaged youths from low-income families with higher burden of debt have a lower level of self-esteem.

H3: The disadvantaged youths from low-income families with higher self-esteem exhibit more job-search behaviors.

This study empirically examines the relationship among debt burden, emotional competence, and job-search behavior among the disadvantaged youths in South Korea. Additionally, the study provides practical implications and add evidence to the question about the ambiguous relationship between economic hardship and job-search behavior.

This attempt is expected to stimulate the interest in youths, particularly the impoverished youths who are vulnerable but overlooked in both practical and academic arears. Young adults have traditionally not been considered a target for research and government support in South Korea, as a healthy group who should live independently on their own. However, over the past two decades, as economic downturns and prolonged unemployment have persisted, coupled with the flexibility of the job market, youth have emerged as a vulnerable group, leading to a rapid increase in related research and policies in recent years.

Methods

Sample and Data Collection

Data was collected from a survey from “The Second Panel Study on the Participants of the Youth Hope Growing Account (YHGA) Program in Korea” (Anonymous et al., 2020). The survey was conducted by the Dongguk University Industry-University Cooperation Foundation, which received a research service from the Korea Development Institute for Self-Sufficiency and Welfare. The survey utilized an online survey method in which the surveyor guided the participants who agreed to the survey over the phone about the survey, and the participants who agreed to the survey responded in a self-written form on a smartphone or PC. The self-administered online questionnaire was designed to be completed on both a smartphone and a PC. Institutional Review Board (IRB), approval was obtained prior to initiating any investigation. The survey respondents were low-income young adults participating in the YHGA program, an individual development account (IDA) for young adults provided by the Korean Ministry of Health and Welfare. The YHGA program targeted young adults receiving public assistance with income below 30% of the median. Choi et al. (2018), as a result of t-test conducting on two groups one participating and the other not participating in YHGA program for youths receiving National Basic Livelihood Security, there was no difference in sociodemographic characteristics (e.g., gender, age, educational level, employment status) between the two groups. Therefore, it indicates that the participants in this study represents impoverished youths with incomes below 30% of the median. The purpose of The YHGA program is to enable young adults to build assets, stop receiving public assistance, and keep working. In YHGA program, young adults receiving public assistance save monthly as earned income deductions, and government subsidies are accumulated according to their earned income. Assets deposited into the account can be collected when the young adults is no longer receiving public assistance. Among the 558 respondents, those who said they would keep their current job or have no specific career plan in 1 year later were excluded as they were deemed not to have a desire to find a job. The rest of the responses—changing jobs, starting a business, etc.—were regarded as job seekers. In addition, excluding cases with missing values in key variables, 464 respondents were used in the final analysis.

Out of these 464 young adults, more than half were female (66.4%). The sample ranged in age from 19 to 41 years (M = 25.9, SD = 4.3). High school graduates (42.7%) were the most numerous, followed in order by university graduates (28.9%), college graduates (21.3%), junior high school graduates (3.7%), people with graduate degrees school or higher (2.8%), and elementary school graduation (0.6%). The majority (46.6%) reported part-time employees. A total of 14.6% of respondents were unemployed. Among the total respondents, 46.3% of the young adults with debt and 53.7% without debt (Table 1).

Table 1.

Demographic Characteristics (N = 464).

Characteristic	N	%	Characteristic	N	%
Gender			Education level
Male	156	33.6	Elementary school	3	0.6
Female	308	66.4	Junior high school	17	3.7
Employment status			High school	198	42.7
Fully employed	179	38.6	College	99	21.3
Part-time employed	216	46.6	University	134	28.9
Unemployed	69	14.9	Graduate students or higher	13	2.8
Age group (M, SD) (Min.–Max.)			(25.9, 4.3)	(19–41)
Income (M, SD) (Min.–Max.)			(110.22, 73.2)	(0–300)

Note. In South Korea, college refers to a 2 to 3 years tertiary education, University level education is divided into undergraduate education (4 years) and graduate level education (2 years for a masters, 3 years for a PhD).

Converting Korean income to dollars, this is equivalent to approximately $790 (as of October 2022).

Measures

Burden of Debt

Burden of debt was measured using one item graded on an 11-point scale to calculate how burdensome a person perceives his or her debt to be. The burden of debt is not about how much debt there is, but how much burden young adults feel about debt. The scale ranges from 0 = no burden at all to 10 = extremely burdensome.

Self-Esteem

This study measured self-esteem using the Rosenberg Self-Esteem scale (Blascovich et al., 1991), which consists of 10 items. Self-Esteem is defined as how an individual considers himself or herself as significant, capable, and worthy (Coopersmith, 1967). After measurement model were verified, we used four items including “I feel I do not have much to be proud of,”“I take a positive attitude toward myself,”“On the whole, I am satisfied with myself,”“I certainly feel useless at times” of self-esteem scale. Negative items were reverse-coded. Each item was rated on a five-point Likert scale (1 = not at all to 5 = all the time). A higher score meant a higher self-esteem level. In this study, the Cronbach’s alpha score on the Rosenberg Self-Esteem Scale was 0.87.

Job-Search Behavior

The study measured job search behavior using a job-search behavior scale developed by B.-W. Kim and Kim (1997); this job-search scale is composed of 16 items including “I look for information (books, internet sites, etc.) about the career or careers that interest me,”“I am setting specific goals related to the career or careers I am interested in,” and “I go to the academy or purchase related textbooks and equipment to achieve my job- or career-related goals.” This measure is rated on a five-point Likert scale, ranging from 1 (not at all) to 5 (all the time). The current study obtained a Cronbach’s alpha of .82 for the job search behavior scale.

Data Analysis

According to the procedures recommended by Anderson and Gerbing (1988), a measurement model was conducted through confirmatory factor analysis (CFA) to assess the proposed dimensionality through the fits of the individual items to their respective scales. After the measurement model was verified, the study tested the structural model using structural equation modeling (SEM) with the maximum likelihood (ML) estimation method. The mediation effect of the variables was estimated by bootstrapping. Bootstrapping is one of the most plausible methods for testing indirect effects (Hayes, 2009). To use bootstrapping and avoid biasing the analysis and results, we used the expectation-maximization (EM) algorithm for the sample. EM is known as an effective technique for managing missing data (Enders, 2010; Schafer & Olsen, 1998).

Several goodness-of-fit indices were considered to assess model fit: Comparative Fit Index (CFI), root mean square error of approximation (RMSEA) with 90% confidence intervals (CIs), and standardized root mean square residual (SRMR). These indices are the most commonly recommended indices (Bentler, 1990; Browne & Cudeck, 1993; Mueller & Hancock, 2008; West et al., 2012). A value <.08 is considered a reasonable fit and a value >.10 is considered a bad fit for RMSEA (Hu & Bentler, 1999). while a value >0.90 is considered a good fit for CFI (Kline, 2011).

In this study, preliminary analysis was performed with SPSS 28.0. Structural equation modeling (SEM) was conducted using AMOS 20.0.

Results

Descriptive Analysis

Table 2 lists the descriptive and bivariate statistics for the study variables. Mean values were used for self-esteem and job-search behavior scales. Except for the correlation between the burden of debt and job-search behavior, the other study variables are found to be statistically significantly correlated to each other.

Table 2.

Descriptive and Bivariate Statistics for the Study Variables.

Variable	Mean (SD)	Range	1	2	3
1. Burden of debt	3.1(3.8)	0–10	1
2. Self-esteem	3.3(0.8)	1–5	−0.126**	1
3. Job search behavior	3.3(0.8)	1–5	−0.058	0.406**	1

p < .01.

Measurement Model

The measurement model was constructed of the latent constructs of the study variables. The study tested individual item reliability to assess the proposed dimensionality. Because of low factor loadings less than 0.7 (Fornell & Larcker, 1981), we deleted six items from self-esteem and one item from job-search behavior. A CFA was conducted on the measurement model with four latent variables of self-esteem and three job-search behavior. The CFA found that the measurement model fit the data reasonably well (χ² = 63.282 (df = 13), p = .000, CFI = 0.967, RMSEA = 0.091 (90% CI: 0.070, 0.115), SRMR = 0.0471).

Structural Model

Given the validated measurement model, the study proceeded to testing the hypotheses using SEM. All fit indices indicate that the hypothesized model has a good fit to the data (χ² = 73.614 (df = 18), p = .000, CFI = 0.964, RMSEA = 0.082 (90% CI: 0.063, 0.102), SRMR = 0.0448). Table 3 presents the assessment of the hypotheses. The effect of debt burden on self-esteem is significant, and self-esteem appears to statistically significantly impact job-search behavior, thus supporting both H2 and H3. On the other hand, burden of debt is not statistically significantly associated with job-search behavior, thus rejecting H1.

Table 3.

Results of Testing Hypotheses.

Hypotheses	Regression coefficients
Hypotheses	Unstand	Stand	SE	CR
H1: Burden of debt → Job-search behavior	0.000	−0.002	0.009	−0.050
H2: Burden of debt → Self-esteem	−0.024	−0.111*	0.011	−2.245
H3: Self-esteem → Job-search behavior	0.448	0.489***	0.050	8.958
$χ^{2}$ = 73.614 (df = 18), p = .000, CFI = 0.964, RMSEA = 0.082 (90% CI: 0.063, 0.102), SRMR = 0.0448

Note. CFI = comparative fit index; RMSEA = root mean square error of approximation; CI = confidence interval; SRMR = standardized root mean square residual.

p < .05, ***p < .001.

Indirect Effect

Bootstrapping was used to test the indirect effect of self-esteem on job search behavior. A bootstrapping test was performed using 2,000 bootstrap replicated samples and a 95% CI. If zero exists in the interval of standardized estimates, it means there is no significant indirect effect. The results reveal that the burden of debt is statistically significantly indirectly associated with job-search behavior without zero scores between lower and upper bounds (95% CI = −0.112, −0.006) and a standardized estimate of −0.054 (p < .01). The results of analyses on the hypotheses and indirect effect indicate that self-esteem fully mediates the relationship between burden of debt and job-search behavior, as presented in Figure 1 and Table 4.

Figure 1.

Mediation model with standardized parameter estimates.

Table 4.

The Values of Effect Size of Self-esteem on Job-search Behavior.

Hypotheses	Total effect	Direct effect	Indirect effect
Self-esteem	−0.057	−0.002	−0.054

Discussion

Due to challenges in the labor market, youths are struggling to find opportunities for decent jobs and more and more youths are giving up on job searching. In this situation, low-income young people face even greater hurdles due to the lack of resources essential for enhancing their job-related skills and improving employability.

In light of this context, the present aimed to explore the mediating role of self-esteem in the path from the economic hardship measured by the burden of debt to job-search behaviors among South Korean low-income job-seeking youths using SEM. The study found that the burden of debt is negatively associated with self-esteem and self-esteem fully mediates the relationship between the burden of debt and job-search behavior. Previous studies on the relationship between economic hardship and job-seeking behavior have reported conflicting results. Some studies have found that economic hardship can lead to increased job search effort (Hausdorf, 2007; Schwab et al., 1987; Wanberg et al., 1996), while others have found that it can lead to decreased job search effort (Basyouni et al., 2021; Ji, 2021). Meanwhile, a study targeting Korean college students reported no significant association between economic hardship and job search behaviors intensity (Il & Kim, 2013). Il and Kim (2013) explained that while economic hardship may increase the need for job search, it does not necessarily lead to job search behaviors, emphasizing that job search behaviors may require motivation, capabilities and resources as well as the necessity. Regarding this, the current study adds no clear evidence to either side with insignificant direct relationship between the two.

Furthermore, the current study underscores the significance of psychological strength. Self-esteem emerges as a robust mediator between economic hardship and job-search behavior, emphasizing the importance of developing and sustaining psychological strength among youths to pursue their career-related goals. Similar to our results, a number of studies have addressed the importance of psychological power, such as self-esteem (Creed et al., 2001; Saks & Ashforth, 1999, 2000; Schwab et al., 1987), self-efficacy (Eden & Aviram, 1993; Ellis & Taylor, 1983; Georgiou et al., 2012; Kanfer & Hulin, 1985), and hope (Anonymous, 2019; Hong et al., 2018) in empowering individuals toward employment pathways.

Therefore, interventions to improve the self-esteem of impoverished youths are demanded, considering that the self-esteem is important factor for the youths. In this respect, psychological or counseling programs for enhancing the self-esteem and psychological well-being of young people should be provided in both universities and local communities. Indeed, mental health programs targeting youths have been expanding significantly every year since 2022, however, there is still a shortage in South Korea.

The current study also found that the burden of debt lowers self-esteem, which is consistent with the previous findings about the negative relationship between economic hardship and mental health (Ho et al., 1995; Sarwar et al., 2021; Whitbeck et al., 1997; Wickrama et al., 2012). The results highlights the urgency of providing financial support to low-income young people in the current situation where job search period is extended. Financial support can allow low-income youths to prepare for better jobs and alleviate the effects of economic hardship caused by prolonged unemployment and low-paid employment. Policies such as debt reduction and housing support might be helpful for the disadvantaged youths from low-income families in terms of increasing their disposable income and reducing economic hardship. For example, the Seoul Metropolitan Government provides support for transportation expenses and monthly rent for low-income youth, while Gyeonggi Province offers support for interview expenses. Such initiatives could be considered for expansion nationwide or for broadening the target demographic and support offerings at the national level.

The Korean labor market has become flexible and dualized for the last two decades in South Korea, resulting in an increase in insecure and temporary jobs and a decrease in decent jobs. This trend is accelerated by COVID-19 and influences youths the most (ILO, 2021; KERI, 2022). The difficulties of achieving secure jobs led youths to face multidimensional difficulties including economic, psychological, and social aspects (Anonymous et al., 2019). This study proposes the necessity to address this issue and provide support to help youths in difficulties not to give up and move forward to achieve their career-related goals.

This study has some limitations. First, the study only focuses on youths in poverty participating in the IDA programs. Therefore, further research should target youths that can be more generalized and applicable to a broader youth population. Second, the relationship between job search behavior, debt burden, and self-esteem of low-income youth was analyzed cross-sectional. Thus, future research is expected to investigate the causal relationships through longitudinal analysis of the relationships among variables. This study also did not consider all the variables affecting the job-search behaviors of youths. In future research, a more comprehensive consideration including other variables is required. Despite these limitations, this study expands the target of youth research to low-income youth beyond college students by focusing on economically disadvantaged youths who have been overlooked in previous research. The current study also contributes to expanding the interest of career development studies mostly focusing on cognition and attitude by investigating the factors of job-search behaviors. Furthermore, the study adds the empirical evidence to understand the process of career-related behaviors and provides practical implications for the economically disadvantaged youth.

Conclusion

Due to prolonged economic downturn and the impact of the coronavirus, many young people are experiencing unemployment and economic hardship. The study investigated the mediating effect of self-esteem in the path from the burden of debt to job-search behavior among South-Korean low-income job-seeking youths during the COVID-19 pandemic. Using a structural equation modeling (SEM) on the second Panel Study on the Participants of the YHGA Program in Korea data, the study found that self-esteem fully mediates the relationship between the burden of debt and job-search behavior. The results of this study confirms the importance of psychological strength in the career path of low-income youths and proposes the need for psychological and financial support for low-income youths to achieve successful economic goals.

Footnotes

Acknowledgements

We thank the anonymous low-income young adults for their useful responses.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2021S1A5A2A01062608).

Ethical Approval

This chapter does not contain any studies with human participants or animals performed by any of the authors.

ORCID iD

Jayoung Cho

Data Availability Statement

Data sharing not applicable to this article as no datasets were generated or analyzed during the current study.

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The Impact of Debt on Job-Search Behavior Among South-Korean Low-Income Youths: Focusing on the Mediating Effect of Self-Esteem

Abstract

Plain Language Summary

Keywords

Introduction

Literature Review

Methods

Sample and Data Collection

Measures

Burden of Debt

Self-Esteem

Job-Search Behavior

Data Analysis

Results

Descriptive Analysis

Measurement Model

Structural Model

Indirect Effect

Discussion

Conclusion

Footnotes

Acknowledgements

Declaration of Conflicting Interests

Funding

Ethical Approval

ORCID iD

Data Availability Statement

References