Labor
It is expected that Korea’s labor force participation rate will dip below 60% this year for the first time in 24 years, due mainly to the rapid aging of the population and shrinkage of the labor market caused by the economic recession.
According to the Statistics Korea and the National Assembly Budget Office, the percentage is estimated at 59.3% this year. It has remained over 60% since 1990 as the country’s nine million or so baby boomers, who were born between 1955 and 1964, have been in the labor market and an increasing number of women have joined them.
In the meantime, the total number of economically active population in Korea is expected to add up to approximately 24,819 million in 2013, 2.3% down from the preceding year’s 25.403 million. Then, the number of economically active population records a negative growth for the first time in 15 years.
The biggest culprit of the erosion of the economic vitality is the aging of the population that is currently in progress at a very rapid pace. This year, Korea’s aging index, which was 77.9% in 2012, is forecast to reach as high as 83.3% to surpass the 80% mark for the first time ever and post the highest rate of increase in history.
The aging index can be defined as the number of those aged 65 or older to that of those aged under 15. In Korea, the figure exceeded 10% in 1978, 20% in 1990, 30% in 1998 and 50% in 2006. The ratio of the aged to the total population is predicted to increase by 0.4 percentage point to 12.2% in 2013.
Another reason is the lack of jobs due to the current economic recession. The number of new jobs in Korea is estimated to stand at about 300,000 this year, 80,000 to 150,000 less compared to the previous year. Experts are voicing concerns that a decline in the labor force participation rate will result in a decreased potential growth rate and prolonged slow growth down the road.
In fact, economic research institutes in the private sector are already saying that the country’s potential growth rate has fallen down to the 3% level. “Economic growth requires working population above all things and a decreasing labor force participation rate brings about a lower economic growth rate eventually,” said Kim Jung-keun, senior researcher at the Samsung Economic Research Institute. He added, “To address such situations, more decent jobs have to be provided for women and young population through technological innovation and productivity enhancement.”