South Korea’s Aging Workforce and Labor Productivity

Abstract

Strong government policies in the 1950s~1960s helped Korea to partake in ‘The East Asian miracle’ (World Bank, 1993). An effective policy environment allowed Korea to take advantage of its first demographic dividend, and to attain rapid industrialization and strong labor productivity within a century (Park, Lee& Mason, 2012). Korea is now the world’s eleventh biggest economy (World Bank, 2017). While a young Korean workforce ushered in domestic economic growth over the last decade, an aging workforce now threatens Korea’s labor productivity prospects. Korea has been aging since the 1970s and in 2018, its elderly (citizens aged 60 years and over) will account for at least 14% of Korean population (Howe, Jackson & Nakashima, 2007). This paper analyzes Korean economic policy alternatives necessary for bridging the forthcoming labor gap, and for sustaining (and improving) Korean labor productivity in the long run amidst an aging workforce. Given an economic policy focus of the paper, a comparative research methodology is applied in analyzing policy alternatives. The paper considers economic policies for aging labor applied in Japan, Germany and US because (a) all three countries have advanced aging policies (Hoehn, 2000; Kim 2010; Achenbaum & Carr, 2014) (b) Japan’s cultural environment and family values are relatively similar to ones in Korea (Kim, 2010) and (c) Korean legal system is similar to German and U.S. legal systems (Jin, 2004). The first section of the paper highlights the urgency in addressing Korea’s aging demographic crisis. The second part of the paper discusses existing government aging policies to enhance labor productivity in its aging workforce. The last section of the paper offers policy suggestions that can add value to existing government policies on sustaining long-term Korean labor productivity.