Žiga Žarnic, Gabrielle McFarlane-Smith, Guillaume Cohen, Shruti Singh, Andrew Reilly, Alexander Hijzen, Emily Hewlett, Dongwoo Lee, Willem Adema, Jean-Christophe Dumont, Anna Rubin, Amal Chevreau, Karen Maguire, Antonella Noya, Francesca Bertolino. [OECD]

Over the past 25 years, Korea has seen significant improvements in terms of employment, health, and opportunities for all. It has seen strong and sustained improvements in life expectancy, working conditions, and income, to name a few. Korea has also built a more gender-inclusive society, that is more enabling of older workers, and that better manages migration and integration. Challenges are numerous, from building a more patient-centred health system, to addressing changing skill needs, or tackling increasing inequality.

Stronger health system for longer, healthier lives

In the 25 years since Korea joined the OECD, life expectancy in Korea has increased from 74.2 years in 1996 to 83.3 years in 2019,1 now exceeding the average OECD life expectancy of 81 years. Korea was able to transform its health care system from one with limited medical infrastructure and a fragmented financing system with several insurance schemes covering a relatively small share of the population, into one characterised by universal coverage and substantial acute care.

Figure 1. Koreans are living longer and healthier lives
Change in life expectancy and avoidable mortality 1996-2019, Korea and OECD Average

Source: OECD Health Statistics 2021.

Korea achieved universal health coverage in 1989, just before joining the OECD, but health system reform and improvements in health outcomes continued since. The 2012 OECD review of Korea’s Health Care Quality praised the country’s commitment to health system strengthening2. Notably, in 2000, Korea’s National Health Insurance Act established a single national insurer, and specified medical benefits to which Koreans are entitled. “Avoidable mortality” has fallen by nearly 60% since 2000, testament to the capacity of the health system to prevent premature deaths.3

Korea has increased investment in health, from spending 5.9% of GDP on health in 2010 to 8.4% in 2020, although it remains below the OECD-16 average of 9.9% of GDP in 2020.4 The government has expanded its national health insurance (NHI) benefit coverage and it promoted quality and efficiency in the health system, as highlighted in the OECD Review of Health Care Quality: Korea 2012. Furthermore, Korea invested significantly in health emergency prevention and response following the Middle-East Respiratory Syndrome (MERS) outbreak in 2015. The OECD Review of Public Health: Korea 2020 pointed to the strengths of the Korean health system, but noted that Korea’s emergency preparedness reforms were so-far un-tested. Since, Korea has shown the strength of its public health emergency preparedness capacity in a highly effective response to the COVID-19 crisis. Despite being one of the first OECD countries to be impacted by the COVID-19 pandemic, Korea responded rapidly and effectively to the crisis, with a very strong test, track and trace system. As a result, Korea has seen one of the lowest rates increased deaths (excess mortality) of all OECD countries.

Figure 2. Increase in all-cause mortality in 2020
Total number of deaths in 2020, compared to average 2015-19 (% change)

Source: https://www.oecd.org/health/covid-19.htm.

Despite the significant progress in the last 25 years, challenges do remain. Korea’s 12.4 hospital beds per 1 000 population in 2018 compared to the OECD average of 4.4 suggest that the Korean health care system is highly hospital-centric. The Korean government is making building a more efficiently organised and patient-centred health care system a priority. Recent efforts in Korea to make the review-and-assessment system more value-based, to establish a community-based comprehensive care system, including long-term care and hospital health information sharing system pilots are welcome policy reforms.5

Looking forward, enhancing public health policies will be a further priority for Korea. As recommended by the OECD Review of Public Health: Korea 2020, focusing on policies to support healthy behaviours, and develop robust chronic disease screening and management programmes, will help the Korean population to live long and healthy lives in the decades to come.

Stronger labour markets

Korea’s economic development during the past 25 years has translated into significant improvements in job quality and inclusiveness, even though significant scope for further progress remains (Figure 3). Thanks to strong productivity performance, wage growth in Korea has been among the strongest in the OECD. Working conditions have improved beyond wages, also resulting in a significant reduction in the share of workers working very long hours. The labour market has become more inclusive as the share of workers with low incomes has fallen, the gap in labour income between men and women has narrowed and disadvantaged groups have become better integrated in the labour market.

Figure 3. Labour market performance has improved significantly
Selected indicators, normalised values, 2006 and 2019

Source: OECD Jobs Strategy Dashboard.

Korea is a leader in supporting job creation, unemployment reduction, and regional economic development through social enterprises and other types of social economy organisations such as cooperatives. As a result, social enterprises provide services and work opportunities for disadvantaged groups.

Looking ahead, significant scope for further progress remains as job quality and inclusiveness remain well below the OECD average. The Korean labour market faces four important challenges:

  • Labour market duality. Over one third of workers in Korea are in non-regular jobs (e.g. independent, temporary, part-time workers). Non-regular employment not only tends to be associated with less attractive pay and other terms of employment, but—as highlighted by the COVID-19 outbreak—is also much more vulnerable to adverse labour market shocks.

  • Changing skill needs. Automation provides new opportunities, but will also have important implications for the nature of many jobs and the skills required. The OECD estimates that in Korea, about 10% of workers face a high risk of seeing their jobs automated, and another 33% will face significant changes in their job tasks due to automation.

  • Population ageing. Korea has the fastest ageing population in the OECD. Boosting labour utilisation through a better integration of older workers will be key to improving living standards among older workers and the elderly and to promote fiscal sustainability in the face of demographic ageing. These challenges are particularly pressing in some regions – the elderly dependency ratio varies from 17.4% in the Capital region to 27.2 in the Gangwon region.

  • Collective bargaining. Korea’s bargaining system is a decentralised system where bargaining predominantly takes place at firm level with a low level of coordination. The number of workers covered by collective bargaining was around 15% in 2018, the seventh lowest level in the OECD and 17 percentage points below the OECD average. Furthermore, non-standard workers have a much lower unionisation rate than standard workers (respectively 0.6 % and 18 %).

An OECD Jobs Strategy chapter on Korea and the Inclusive Growth Review of Korea point at four areas for policy action

  • Integrating underrepresented groups. Promote labour force participation among older workers (see below) and women (see below) and young people. For young people, it will be important to promote school-to-work transitions and limit the risk of scarring as a result of the COVID-19 crisis. This includes providing services targeted at the most vulnerable,6 stepping up career counselling, developing apprenticeships and vocational education (notably Meister schools), introducing incentives for tertiary education as already planned by the government7 and targeting actions for specific groups (people with disabilities, youth, older workers) that include pre-employment skills and training and other related support services in partnership with social enterprises to strengthen community-led development.8

  • Supporting workers rather than jobs. Effectively addressing labour market duality requires a shift from protecting jobs to protecting workers.9 This includes easing employment protection for permanent workers, to encourage hiring regular workers by firms, reinforcing social protection, notably unemployment insurance, as well as strengthening active labour market policies, to smoothen transitions from one job to another.

  • Anticipating skill needs by promoting participation of disadvantaged groups in adult learning including through financial incentives, and by promoting a shared vision of the adult learning system across all parts of government and enhance stakeholder engagement.10 Better aligning employment and skills to local strategic growth sectors, as well as enhancing employer engagement will also be crucial.11

  • Promoting a more inclusive and coordinated bargaining system by ensuring broad access to collective bargaining, notably to non-standard work, by balancing high coverage and flexibility, including by using framework sectoral agreements tailored at firm level and wage co-ordination.12

Working better with age

Thanks to improvements in living standards and in the quality and availability of healthcare, average life expectancy at birth in Korea increased from 62 years in 1970 to 83 years half a century later, well above the OECD average level of 80 years. These trends are leading to fast population ageing in Korea: the number of persons aged 65 or over for every 100 persons of working age (20 to 64) is projected to exceed 78 in 2060.

In such a context, giving older people better work choices and incentives and access to good jobs is crucial for promoting economic growth and improving the sustainability of public social expenditures. Korea is outperforming OECD countries in engaging older workers in the labour market. At almost 34%, the employment rate of workers over the age of 65 in Korea is twice the OECD average.

Figure 4. High employment rates for older workers coexist with high poverty rates
Employment rates and poverty rates by age, percentage

Source: OECD Income (IDD) and Wealth (WDD) Distribution Databases 2021 and OECD Employment rate by age group 2021.

Low jobs quality for older Koreans, however, remains a significant challenge. The OECD’s Inclusive Growth Review of Korea shows that many workers retire early from their main job (often before reaching age 55) and find new employment in insecure and low-paid jobs, or become self-employed. Nearly two out of every five workers aged 55-64 in Korea holds a non-permanent job, compared to one in every ten on average in the OECD. For many workers, this results in lower earnings and potential hardship. Indeed, Korea has the highest rate of poverty in the population aged above 65 among OECD countries. Pension adequacy will improve as the pension system matures, but the future net mandatory public and private pension replacement rate is fairly low at 43% for an average income earner after a full career from age 22 (OECD average is 59%).

Recent government initiatives–including raising the minimum mandatory retirement age to 60 in 2016-17, and the introduction of a job- and competency-based system for setting wages and reduce working time–can improve working conditions. Efforts, however, will be needed to implement measures effectively.

The OECD Working Better with Age: Korea review highlights that living standards and quality of jobs can be improved for older workers by expanding incentives for workers and employers to ensure that workers stay longer in their career jobs, promoting more flexibility in wages, lowering working hours and improving access to more flexible work. Establishing occupational health and safety systems and better access to lifelong learning are also important.

Promoting participation in adult learning among older Koreans will also be key to improve the quality of their jobs and help them cope with labour market adjustments linked to the COVID-19 crisis as well as to demographic ageing, the digital transformation, and climate change. Less than 10% of older adults (55-65) in Korea have the digital problem-solving skills needed in today’s labour market compared to 65% of 16-24 years old–the largest difference among OECD countries.

Korea has put in place several policy initiatives to promote inclusiveness in high-quality training opportunities. The OECD’s Getting Skills Right: Future-Ready Adult Learning Systems identifies policies that Korea can use to improve further participation in adult learning for older workers. The accompanying Priorities for Adult Learning Dashboard benchmarks the performance of the adult learning system in Korea to that of other OECD countries. In Korea, the gradual implementation of the National Competency Standards can help to better recognise, use, manage and reward the actual skills and competencies of the workforce, but it will take time to materialise.

Figure 5. Older Koreans need to build their skills to thrive in the labour market
Percentage of adults with high proficiency in problem solving in technology-rich environments, by age

Note: High proficiency is defined as performing at levels 2 and 3 in the OECD Survey of Adult Skills.

Source: Survey of Adult Skills (PIAAC) (2012).

The upcoming monitoring report of the OECD’s Council Recommendation on Ageing and Employment will highlight progress made by Korea, and other countries, in implementing policies for strengthening employment opportunities at an older age.

A more gender-equal society

Since joining the OECD, Korea has made significant progress in building a more gender equal society. In 2018, Korea had the highest share of young women with tertiary education in the OECD (around 98% of those aged 25-34),13 and women’s employment rates rose by nearly 10 percentage points between 1999 and 2019 (Figure 6) and the gender wage gap dropped from 47% in 1992 to 32% in 2019.14

Figure 6. A Larger share of Korean women are working, though a sizeable gap remains
Employment rate, % of working age population, Q3 1999-Q1 2021

Source: OECD Gender Data Portal.

Policy reform contributed to the move towards a more gender equal society. As shown in Rejuvenating Korea: Policies for a Changing Society (OECD, 2019), Korea undertook early childhood education and care (ECEC) and parental leave policy reforms that help reduce the care burden on women and foster their participation in the labour market. Korea increased its public spending on ECEC from 0.1% of GDP in 2004 to 0.9% in 2014 - the largest increase in the OECD over the period.15 These investments by successive governments mean that 92% of children in Korea participated in ECEC in 2017. Because of public support, out-of-pocket childcare costs are among the lowest in the OECD.16 Korea has also developed a relatively comprehensive system of paid child-related leave, with 90 days of paid maternity leave and an individual entitlement of one year of paid parental leave for both eligible mothers and fathers.17 In 2020, Korea introduced family care leave of up to 10 days per year to improve work life balance, and launched a salary comparison website showing salary brackets of private sector employees based on gender, as well as firm size and business type.18

Challenges remain, however. Women, remain more likely than men to be in low-paid non-regular (fixed term) employment. At 32%, the gender wage gap is the highest in the OECD, and employment is particularly low among women of parenting age. Among Korean women aged 35 to 44 for example, the employment-to-population-ratio stood at 60%, 30 percentage points less than Korean men, and nearly 10 percentage points less than the OECD average.19 Many workplaces have cultures that are still not conducive to mothers and fathers taking leave.

As it continues to build a more gender-equal society, Korea should further ease access to parental leave, notably for non-regular workers and the self-employed.20 In addition, unsupportive workplace cultures must be tackled by monitoring the effects of maximum hours legislation, or by linking data on health and employment insurance to help investigate firms suspected of not allowing workers to take maternity leave.21 Regular publication of gender wage data and “gender audits” of workplace practices could help reduce discriminatory pay practices.22 Finally, as discussed in the section on employment, labour market dualism must be broken down to help men and women make full use of their educational achievements and pursue their labour market aspirations.

Better management of migration and integration

Since joining the OECD, Korea has witnessed a slow but continuous growth in its foreign population. The share of foreigners in the total population went from a low 0.2% in 1996 to almost 4% in 2020 when the foreign population reached 2 million, with most foreigners of working age (Figure 7). This is still much lower than the OECD average but the sharpest growth recorded in the OECD over this period.

Figure 7. A Growing foreign population in Korea
Foreign population in 1,000s, and as a share of the population, 1987-2020

Source: International Migration Database.

The migration policy reform of the early 2000s has created the basis for an efficient management of temporary labour migration. The Employment Permit System (EPS) introduced in 2004 had two main components. The first was a programme for admission of temporary foreign workers for up to three years, through bilateral agreements, whereby workers were assigned to employers in a fixed number of sectors through quotas. The second component was a programme for admission of ethnic Koreans abroad – primarily Chinese – to visit and work in specific sectors in Korea for up to almost five years. Since its introduction, the number of employees under bilateral agreements have risen to about 300,000, or 10% of manufacturing sector employment. The number of ethnic Koreans rapidly reached its cap, although it has since fallen as many participants changed status to permanent residence.

The OECD review of the Korean labour migration system23 suggested to reinforce mechanisms to prevent employers from becoming dependent on lower productivity EPS workers and to provide incentives for improving working conditions. The review also made concrete proposals to improve the potential of labour migration programmes to meet a wider range of needs and improve the migration data system. Since then, Korea developed a new selection method for EPS workers to all participating origin countries. The method involves an initial round of a Korean language test, now followed by a skills test and an additional optional competency test. In 2021, the Ministry of Employment and Labour also introduced new measures to improve the housing conditions of EPS workers.

Challenges remain, however. Around 40% of permanent migration in Korea is family migrants—a relatively stable inflow over the past decade, though in slight decline as a share of total permanent migration due to an increase in the number of ethnic Koreans acquiring permanent-type residence.24 Family migrants are mostly women marrying Korean men in rural areas. Despite the efforts of the Ministry of gender equality and family—which provides important support programme to multicultural families notably in terms of language training, Korean culture and counselling—integration often remains a challenge25 and children of multicultural families are struggling to compete in the education system.26

Latest OECD statistics27 show that more than 1.7 million Koreans live in another OECD country, a number that has grown by 23% since 2001. About 57% of them are tertiary educated. Even if highly skilled Koreans abroad only represent 4.8% of the highly-skilled Korean workforce, policies to better tap into this talent pool could help boost productivity and respond to population ageing.

Improving well-being and strengthening the inclusiveness of Korean society

Korea has made impressive advances towards a more inclusive society across different dimensions of well-being in the last decade, achieving 24 out of 118 SDG targets for which the data are available on a comparable basis.28 Korea has caught up with the most advanced economies, joining the 30-50 club29 in 2017 and reaching 97% of the average income of OECD in 2019.30 An increasingly well-educated population has enabled Korean exporters to become globally recognized names.

Korea shares some of its challenges with other OECD countries, in terms of income, gender and other inequalities. The top 20% earners make seven times more than the bottom 20%, compared to five times on average across the OECD. It would take a child born into a low-income household about 5 generations to reach the average income level, compared to the OECD average of 4.5 generations.

Moreover, while workers in the bottom 10% of the income distribution saw no real wage growth over the past two decades, the income share of the richest 1% rose from 7.5% in 2007 to 11.2% in 2014 (i.e. SDG target 10.1). Relatively weak social protection schemes (SDG target 1.3) and low redistribution through taxes and transfers (SDG target 10.4) spur relatively high-income poverty rates (SDG targets 1.2 and 10.2) above the OECD average, which is a serious challenge particularly among the elderly (at 45.7% for Korea, compared to the OECD average of 12.9%). As discussed above, gender inequality persists (SDG targets 5.4 and 5.5).31

The single most important message from the Inclusive Growth Review of Korea: Creating Opportunities for All is that policies should create equal opportunities for all by design, across different dimensions of well-being. This means:

  • Operationalising an integrated approach to policies. The Korean New Deal, introduced in July 2020 as a national development strategy to support the country’s recovery from the COVID-19 pandemic, is a step in the right direction that considers both green and inclusiveness dimensions from the outset, while harnessing the potential of digitalisation.

  • Investing in people left behind to provide equal opportunities for all, by reducing income, gender and other inequalities as well as cutting down the relative poverty rate.

  • Promoting trust and raise support for policy reforms, by continuing to engage actively with citizens, addressing past legacies and perceptions of undue advantages, confronting any vested interests in business, education and other dimensions of life—and highlighting how the government’s responses to the COVID crisis has built the case for putting people at the centre.

  • Integrating well-being in the budget, to ensure longevity and continuity beyond the electoral cycle, and inform necessary adjustments in budget allocations coherently with the inclusiveness and innovative growth pillars of the Korean New Deal.

  • Consolidating and strengthening a measurement framework focused on well-being outcomes and the distribution of outcomes across the population; building on OECD tools to track the outcomes of recovery efforts and measure distance to SDG targets by taking different dimensions of well-being into account.

Figure 8. Selected inclusive growth indicators for Korea, by four pillars of the OECD Inclusive Growth Dashboard applied to Korea

Source: OECD (2021), Inclusive Growth Review of Korea: Creating Opportunities for All, OECD Publishing, Paris, https://doi.org/10.1787/4f713390-en.

Notes

7.

OECD (2019), Investing in Youth: Korea, Investing in Youth, OECD Publishing, Paris, https://doi.org/10.1787/4bf4a6d2-en.

8.

OECD (2014), Employment and Skills Strategies in Korea, OECD Reviews on Local Job Creation, OECD Publishing, Paris, https://doi.org/10.1787/9789264216563-en.

9.

OECD (2018), Towards Better Social and Employment Security in Korea, Connecting People with Jobs, OECD Publishing, Paris, https://doi.org/10.1787/9789264288256-en.

10.

OECD (2021), Inclusive Growth Review of Korea: Creating Opportunities for All, OECD Publishing, Paris, https://doi.org/10.1787/4f713390-en.

11.

OECD (2014), Employment and Skills Strategies in Korea, OECD Reviews on Local Job Creation, OECD Publishing, Paris, https://doi.org/10.1787/9789264216563-en.

12.

https://www.oecd.org/publications/negotiating-our-way-up-1fd2da34-en.htm

25.

In 2017, only 56% of foreign women were in employment compared to 83% for their male counterparts.

28.

In Korea, the Global SDG Indicators Database covers 118 of the 169 SDG targets, however, “Korea’s distances to specific SDG targets” using the OECD methodology developed in “Measuring Distance to SDGs” report can be measured for 97 of them, since 21 targets can only be measured with indicators that lack a clear normative direction.

29.

30-50 club’ denotes countries with per capital gross national income (GNI) surpassing USD 30,000 and a population of over 50 million. The figure is featured in the Korean New Deal.

30.

OECD National Accounts Database, http://dotstat.oecd.org/Index.aspx?DataSetCode=SNA_TABLE1.

31.

For instance, the gender wage gap at 32.5% in 2019 was among the highest in the OECD, and was mirrored in a large labour participation gap. 52.9% of women participating in the labour market in 2018, compared to the participation rate of 73.7% among men.

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