Productivity and long term growth

Going for Growth 2018 - Korea note


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Going for Growth is the OECD flagship report analysing structural policy settings and economic performance to provide policymakers with concrete reform recommendations to boost growth and ensure that the gains are shared by all. The 2018 Interim Report reviews the main growth challenges and takes stock of reforms enacted over the past year - in both advanced and emerging economies - on policy priorities identified in the previous issue of Going for Growth.

Country highlights

Korean GDP per capita remains close to the OECD average reflecting sustained rapid growth. Productivity, however, is significantly lower than the OECD average, while working hours are among the longest in the OECD. Inequality is below the OECD average but the most deprived section of the society hold a part of national income below the OECD average, not least reflecting wage inequality stemming from labour market dualism.
Boosting productivity is a key challenge and requires reforms to reduce barriers to entry and competition, particularly in services, as well as reducing administrative burden so that the transformation of the economy and workplace culture are better suited to face pressures from rapid technological change and ageing. Female labour force participation remains also another challenge with the gender employment gap among the highest in the OECD countries. Boosting female participation - particularly important in a context where rapid population ageing increases labour force shortages - requires further progress on the childcare system as well as on work place culture.

Going for Growth 2017 recommendations include:

  • Reduce the regulatory burden on economic activity by assessing and reducing the regulatory burden, improving regulatory quality and phasing out entry barriers, in particular in the service sector.
  • Strengthen policies to support female labour force participation by enhancing childcare quality and increasing the take-up of maternity and parental leave systems. Raise parental leave benefits and promote a workplace culture that supports work-life balance. 
  • Reform EPL and tackle labour market dualism by relaxing employment protection for regular workers, in particular improving the procedures for unfair dismissal, and by increasing the minimum wage and expanding social insurance coverage and training for non-regular workers.
  • Improve the efficiency of the tax system and strengthen the social safety net by increasing taxes which have a less negative impact on growth, such as VAT, property and environmental taxes, and by focusing the basic pension on the elderly with the lowest incomes to reduce the relative poverty rate for the population aged over 65 years, and expanding the coverage of the National Pension Scheme.
  • Reduce producer support to agriculture by further reducing barriers to agricultural imports, scaling back the actual level of support and shifting its composition away from market price measures toward direct support.

Recent policy actions in these areas include:

  • Labour market dualism will be reduced as the new government plans to turn 205,000 non-regular workers in the public sectors into regular staff by 2020.
  • The labour force participation of women has been enhanced as the parental leave benefit increased twice – the benefit level for the first three month of the leave increased from 40% of the ordinary wage to 80% of that, which started to be applied since September, 2017. It is expected to further increase by 2019 with the benefit level beyond the first three month reach 50% of the ordinary wage from 40%, the current rate.
  • The social safety net has been strengthened by relaxing the eligibility criteria, particularly on age, for the Basic Livelihood Security Programme for children under 13 to children under 17.


Korea: Latest Economic Forecast 

Korea: Latest Economic Survey


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