Barriers to Growth
At a recent symposium hosted by the Korea Economic Research Institute and the Korea Economic Association, OECD senior economist Randall Jones mentioned low labor productivity and strict regulations as two of the biggest factors hindering the growth of the South Korean economy.
“South Korea’s product market regulation index is the fourth-highest in the OECD, following Turkey, Israel and Mexico, and such tight regulations are hampering its economic growth,” he remarked, adding, “In addition, South Korea’s labor productivity is about half of that of the top 17 OECD member countries while the productivity of the service industry, which contributes more to job creation, with respect to that of the manufacturing sector is about half of the OECD average.”
He went on to say, “One of the fundamental reasons for the low productivity is the fact that South Korea has the most rapidly aging population in the entire OECD and, in this context, South Korea is in need of labor market flexibility along with a wage structure reform.”
“In the South Korean labor market, which is characterized by the lack of ease of employment and dismissal, some militant labor unions are engaged in irrational labor movements these days to affect the majority of workers,” said Jo Jang-ok, head of the Korea Economic Association. South Korean representative at the UN Sustainable Development Solutions Network Yang Soo-kil echoed by saying, “South Korea’s labor-intensive economic structure is out of date and a drastic change in national management itself is required.”