Click to READ

• Overview of the Economic Survey of Korea 2012 
• Overview also available in Korean
• Remarks by Mr. Angel Gurría, OECD Secretary-General

Korea recovered faster and more vigorously from the 2008 global crisis than most OECD countries, and enjoys low unemployment and low government debt. Growth slowed in late 2011, reflecting the deterioration in the world economy, but is projected at around 3½ per cent in 2012. Korea has been one of the fastest-growing OECD countries, with real GDP rising by more than 4% per annum during the past decade. Rapid growth narrowed the per capita income gap with the United States from 62% in 1991 to 36% in 2010.

Download data in Excel:

Sustaining the convergence process will become increasingly difficult, as the potential growth rate will fall, in part as productivity growth continues to slow. Moreover, Korea faces the most rapid population ageing in the OECD area. Indeed, Korea, which currently has the third-youngest population, will have the second oldest by 2050. Sustaining Korea’s growth potential in the face of demographic headwinds requires a wide range of policies, including:

• "Low Carbon, Green Growth", which the President identified in 2008 as the vision to guide Korea’s development over the next 50 years.
• Measures to increase labour force participation, particularly of women, youth and older persons, and to break down the dualism that limits the human capital of non-regular workers.
• Financing social spending, which will rise with population ageing, through tax measures that limit the negative impact on growth potential.
• Further improving the education system to boost productivity growth.
• Promoting Korea’s convergence to the high-income countries by developing the service sector, where productivity is only about half of that in manufacturing.
  

Income inequality has risen to the top of Korea’s political agenda, driven by such issues as high university tuition fees and labour market dualism. Income inequality, as measured by the Gini coefficient, has been on an upward trend until 2009, when it reached the OECD average. Meanwhile, relative poverty – the share of the population living on less than half of the median income – rose to 15% in 2008, the seventh highest in the OECD area.

Income inequality has risen to the top of Korea’s political agenda, driven by such issues as high university tuition fees and labour market dualism. Income inequality, as measured by the Gini coefficient, has been on an upward trend until 2009, when it reached the OECD average. Meanwhile, relative poverty – the share of the population living on less than half of the median income – rose to 15% in 2008, the seventh highest in the OECD area.

While economic growth can help reduce income inequality and poverty, Korea’s experience shows that achieving a high growth rate is not sufficient in itself to address inequality and poverty. A wide range of policies are needed to make Korea more equitable and cohesive, while sustaining growth:

• Break down labour market dualism by relaxing employment protection for regular workers, expanding the coverage of non-regular workers by the social safety net and increasing training opportunities for non-regular workers to enhance their employment prospects.
• Relax the conditions for receiving benefits under the Basic Livelihood Security Programme and expand the earned income tax credit to reduce poverty, while promoting work incentives.
• Improve equity through education reforms, notably by increasing the access of disadvantaged children to high-quality early childhood education and care, reducing the role of private tutoring, including hagwons, while increasing access to low-cost after-school lessons, and expanding student loans, with repayment contingent on post-graduation income.
• Raise productivity and wages in the service sector by strengthening competition, while slowing the inflow of older employees into self-employment in services.
• Lower the high rate of poverty among the elderly by expanding the Basic Old-Age Pension System and focusing it on low-income persons, improving the National Pension Scheme and promoting private savings for retirement by accelerating the introduction of company pensions.
• Ensure equitable access to health care by reducing out-of-pocket spending by broadening the coverage of the National Health Insurance and reducing co-payment ceilings, while offsetting the cost by improving the efficiency of health care.
  

How to obtain this publication

Additional information