www.oecd.org/eco/surveys/economic-survey-korea.htm

OECDOECD Economics

2016 OECD ECONOMIC SURVEY OF KOREA

Promoting socially-inclusive growth

Sejong, 16 May 2016

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Growth has slowed toward the OECD average

Source: OECD Analytical Database.

GDP growth at an annual average rate in per cent

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Productivity growth has been weak

Percentage change at an annual rate in GDP per hour worked in 2010 prices, from 2011-14

Source: OECD Productivity Database.

4

The productivity level lags leading OECD countries

Each country’s performance relative to the top 17 OECD countries in 20141

1. Labour productivity equals GDP per hour of labour input.Source: OECD Going for Growth Database.

5

Population ageing in Korea will be the fastest in the OECD

Population aged 65 and over as a share of the population aged 15 to 64

Source: OECD Demography and Population Database.

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The labour force is projected to shrink

1. The participation rates for men and women are assumed to remain at their current levels for each age group.2. Female participation rates are assumed to reach current male rates in each age group by 2050.Source: Statistics Korea, Population Projection for Korea (2015) and Economically Active Population; OECD calculations.

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Employment rates are low for women and youth

Source: OECD Employment Outlook Database.

Working-age popula-tion

Women Youth (15-29) Adults (30-54) Older persons (55-64)30.0

40.0

50.0

60.0

70.0

80.0Korea OECD average

80.0

70.0

60.0

50.0

40.0

30.0

Per centPer cent

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Wage inequality is high in Korea

Share of full-time workers earning less than two-thirds of median earnings1

1. Including bonuses. In 2013.Source: OECD Demography and Population Database.

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Poverty rates are high for persons over 50

Relative poverty rate in per cent1

1. Defined as a the share of the population with an income below half of the national median. Source: OECD Income Distribution Poverty Database.

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Raising productivity

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Productivity in services is low in Korea

Manufacturing = 100; in 2014 based on 2010 prices

Source: OECD National Accounts Database; OECD STI Database.

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Product market regulation in Korea is stringent

The indicator ranges from zero (most relaxed) to three (most stringent)

Source: OECD Product Market Regulation Database; Koske et al. (2015).

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Skills of older workers in Korea are low

Source: OECD (2013), OECD Skills Outlook 2013: First Results from the Survey of Adult Skills.

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Productivity gap between large and small firms is wide in Korea

Labour productivity in wholesale and retail trade; large firms = 1001

1. Large firms have 250+ workers (300+ in Korea). Small firms are those with 50-249 workers (50-299 in Korea). Source: OECD (2015), OECD Science, Technology and Industry Scoreboard.

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Government guarantees for loans to SMEs are high in Korea

Source: OECD (2016), Financing SMEs and Entrepreneurs 2016: An OECD Scoreboard.

In 2014

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Venture capital investment is increasing

Source: Korea Venture Capital Association.

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Barriers to entrepreneurship are high

Source: OECD Product Market Regulation Database; Koske et al. (2015).

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Image of entrepreneurship is poor in Korea

Source: OECD (2013), Entrepreneurship at a Glance 2013.

Share of respondents with a broadly favourable image of entrepreneurs

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Labour reform to boost employment and social

cohesion

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The take-up of maternity and parental leave is low

Source: Yoon (2014).

As a percentage of the number of births each year

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Working hours are long

Source: OECD Family Database.

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Women are concentrated in non-regular jobs

1. Includes temporary employees and atypical workers (dispatched, daily on-call, in-house, independent contractors, etc.).Source: Statistics Korea, Economically Active Population Survey, August 2015.

Employees by employment status as a percentage of total employment in 2015

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The gender wage gap is large

1. The difference between median earnings of men and women relative to median earnings of men.Source: OECD Earnings Distribution Database.

In 2013 or latest year available for full-time employees1

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The share of women in management is low

Source: OECD Family Database.

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The youth employment rate has fallen

Source OECD (2015), Labour Force Statistics.

Employment rate for the 15-29 age group

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As a share of the 15-29 age group¹

The rate of NEETs in Korea is high for tertiary graduates

1. Data on the category ISCED 4, which captures programmes that straddle the boundary between upper secondary and post-secondary education, are not available in Korea and 11 other OECD countries. The chart therefore overestimates the number of youth who are classified as NEETS in these countries.Source OECD (2015), Education at a Glance 2015.

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Older workers are concentrated in temporary jobs

Source: OECD Employment, Labour and Social Affairs Database.

Percentage of employees with job tenure less than 6 months in 2014

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The skill gap between generations is high

Source: OECD (2013), The Survey of Adult Skills: Reader’s Companion.

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Job tenure in Korea is relatively short

Source: OECD Employment, Labour and Social Affairs Database.

Percentage of employment by job tenure intervals in 2014

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Non-regular workers have lower income

1. In households headed by regular and non-regular workers. Households with two or more persons.

Source: Korea Labour Institute, Korean Labour and Income Panel Survey (KLIPS); OECD calculations.

Annual earned income (before tax)¹

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The poverty rate is higher among non-regular workers

1. Household head under age 60. Households with two or more persons.

Source: Korea Labour Institute, Korean Labour and Income Panel Survey (KLIPS); OECD calculations.

Relative poverty rate based on the employment status of household head¹

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Education spending is lower in non-regular households (1)

1. Households with two or more persons. The data are on an equivalised based to take account of the size of the household (household expenditure divided by the square root of the number of persons in the household).

Source: Korea Labour Institute, Korean Labour and Income Panel Survey (KLIPS); OECD calculations.

Monthly expenditure based on the employment status of household head¹

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Education spending is lower in non-regular households (2)

1. Households with two or more persons. Up to age 18. Private education cost includes private tutoring institutions (hagwons), private tutors, and early childhood education and care.

Source: Korea Labour Institute, Korean Labour and Income Panel Survey (KLIPS); OECD calculations.

Monthly expenditure based on the employment status of household head¹

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The National Pension Scheme will fall into deficit

Source: National Pension Research Institute.

Main findings• Raising productivity

‒ Product market regulation is the fourth most stringent in the OECD. ‒ Venture capital investment is rising, but its funding of start-ups is limited. ‒ Only 0.7% of the R&D in Korea in 2014 was financed from abroad.

• Fiscal policy‒ Korea faces headwinds from sluggish overseas and domestic demand.

• Increasing employment ‒ Female employment is constrained by the limited take-up of maternity and parental

leave, the availability of high-quality childcare and the gender wage gap.‒ Youth employment is low and the share of NEETs is high.‒ Older workers are pushed out of firms at an early age.

• Promoting social cohesion

‒ Non-regular workers earn only about half as much as regular workers per month. ‒ The relative poverty rate among the elderly is the highest in the OECD at 49.6%.

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Key recommendations• Raising productivity

‒ Use the new “cost-in, cost-out” system to reduce the regulatory burden. ‒ Focus venture capital on start-ups by facilitating early-stage IPOs and taking

further steps to jumpstart the M&A market through regulatory reform. ‒ Relax barriers to trade and investment to connect to global innovation networks.

• Fiscal policy‒ Use fiscal policy to sustain growth in 2016-17, while setting policy in a framework

that ensures Korea’s long-run fiscal sustainability.

• Increasing employment ‒ Increase the take-up of maternity and parental leave by enforcing compliance. ‒ Expand Meister vocational schools and the Work-Study Dual System, using NCS.‒ Accelerate the adoption of the wage peak system and expand education for older

persons with low skills.

• Promoting social cohesion

‒ Break down dualism by relaxing employment protection for regular workers and expanding social insurance coverage and training for non-regular workers.

‒ Focus the Basic Pension on the elderly with the lowest incomes to reduce poverty; expand the coverage of the NPS to reduce poverty in the long run.

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More information…

www.oecd.org/eco/surveys/economic-survey-korea.htm

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