Jon Pareliussen
OECD Economic Surveys: Korea 2026
Abstract
Human capital is a key driver of productivity. Gains in education attainment have contributed to Korea's rapid growth over the past half century. Intensive tutoring to enter top universities boosts the reading, science and mathematics skills of youth, but adult skills in Korea are below average as skills deteriorate sharply by age. Falling returns to tertiary degrees is also an opportunity to refocus education on training that is more closely associated with demanded skills. Reprioritising resources freed by shrinking youth cohorts could improve skills like critical thinking and learning-to-learn which are foundations to continue learning as adults, and strengthen quality in universities. In the labour market, those who participate in adult training or regularly learn by doing have markedly higher skills, but the shares of adults engaging in such activities are low. Policies to improve labour market matching regardless of age and gender and coordinating investments in skills better at the sectoral and national levels would encourage adult learning, as would a shift in working culture to encourage critical thinking.
The importance of education and skills is deeply ingrained in Korean culture. Investments in education and skills were an important part of Korea’s stellar growth over the past 60+ years, often referred to as “The Miracle on the Han River” (OECD, 2024[1]). High birth rates from the 1960s to the early 1980s increased the supply of labour from the end of the Korean War until today (Pareliussen et al., 2025[2]), while Korea’s zeal for education increased its quality. Together with openness to trade, sound macroeconomic policies, high capital investments and technological catch-up, this laid the foundation for Korea’s remarkable growth. The literacy rate was already 71% in 1960 compared with an average of 29% in low-income countries. The secondary school enrolment rate was twice as high as the low-income country average at 27% (OECD, 1996[3]). Today, 71% of 25-34-year-olds have completed tertiary education, the highest share in the OECD, while only 1% of 25-34-year-olds have not attained upper secondary education, the lowest share in the OECD (OECD, 2025[4]).
Now, as a diminishing share of workers is supporting a rapidly ageing population, growing GDP per capita further will require considerable labour productivity growth. This comes at a time when important inputs to the old growth recipe are running out of steam. Labour supply’s contribution to GDP growth is slowing and will go into reverse around 2030, following decades of very low fertility (Chapter 1). The scope for growing by technological catch-up is very different from what it was a few decades ago, with advanced Korean companies now operating at the global technological frontier. Accelerated capital deepening is also unlikely to be a credible or desirable option. Following Korea’s rapid capital accumulation since the 1960s, investment as a share of GDP remains among the highest in the OECD, while the return on additional investments has decreased. Investment needed per unit of growth has already surpassed that in the United States (OECD, 2024[1]).
Increasing total factor productivity (TFP) is key to meeting these challenges and workers equipped with the needed skills will help diffuse technologies and good practices throughout the economy. Furthermore, the role of high-level human skills in driving productivity growth may increase due to complementarities with Artificial Intelligence (AI). This chapter focuses on the supply of skills, while product-and labour market reforms discussed in previous Surveys can also help reduce mismatches between demand for skills and firms’ abilities to absorb skilled workers (OECD, 2024[1]; OECD, 2022[5]).
Skills, as defined in the OECD Survey of Adult Skills (PIAAC) (Box 3.1), deteriorate sharply with age. The average score has declined, and the share of weak performers has increased over the decade from cycle 1 (2012 for Korea) to cycle 2 (2023) (Figure 3.1). Declining skills by age is a concern across the OECD, where countries are affected by varying degrees of ageing workforces (OECD, 2025[6]). It is a key challenge for Korea, with the most rapidly ageing workforce in the OECD in the years to come (Pareliussen et al., 2025[2]).
The second cycle of the OECD Survey of Adult Skills, which is a product of the Programme for the International Assessment of Adult Competencies (PIAAC), took place in 2022/23, 11 years after the first cycle. The Survey of Adult Skills assesses literacy, numeracy and adaptive problem solving based on conceptual frameworks defining these skills and how to measure them. The skills assessment modules are combined with a background questionnaire covering variables including age, gender, family, immigrant background, educational attainment and labour market status.
Responding to an assessment task requires accessing and understanding the information provided, evaluating it and reasoning critically. Within each module, skills are measured on a 500-point scale, which is divided into functional skill levels, each straddling 50 PIAAC score points. Individuals at the lowest levels (level one and below, scoring 175 points or less) can at best respond to simple tasks with straightforward processing and little irrelevant information. Individuals scoring at the highest levels (levels four and five, scoring 326 points or higher) can access, analyse, reason, and critically reflect on complex and abstract tasks and separate relevant from irrelevant information to arrive at the correct response.
The second cycle (data collected in 2022-23) of the OECD Survey of Adult Skills is designed to be able to statistically compare scores in literacy and numeracy to scores within the same module in the first cycle (data collected in 2011-12 for most countries). Results cannot be compared between the different modules (literacy, numeracy, adaptive problem solving), but the correlation of scores between the modules is in general very high, especially so between literacy and numeracy.
Source: OECD (2024[7]).
Source: OECD (2024[7])
In Korea, literacy declines by approximately 40 score points from the youngest age group to the oldest one. The gradient of declining skills by age is similar to the first cycle of the OECD Survey of Adult Skills, but much sharper than the OECD average. All cohorts excluding aged 16-24, have lost ground compared to 2012 and compared to the OECD average (Figure 3.2, Panel A).
Note: Results from an OLS regression using the repest command on PIAAC microdata for all OECD countries participating in both cycles. Panel A only controls for age groups, while Panel B also controls for educational attainment (completed tertiary, completed upper secondary or did not complete upper secondary), parents’ educational attainment, participation in adult education and training the past 12 months (dummy), and the incidence of learning by doing (daily, weekly, monthly or less). The OECD average is a simple average of regression results for individual countries. Most countries participating in cycle 1 collected data in 2012-13, while some countries included in the OECD average collected data in 2015 (Chile, Israel, New Zealand and Lithuania) and 2018 (Hungary).
Source: Pareliussen (2026[8]).
The large age gap cannot solely be explained by increasing educational attainment and quality over time. Comparing the results of age cohorts in cycle 1 to the corresponding cohorts in cycle 2 shows that skills have also weakened drastically within cohorts (OECD, 2025[4]). Indeed, adjusting for increasing inputs into the skills production function, notably the fact that each generation has higher educational attainment and more educated parents than the previous one, widens the gap. While Korea scored equal to or above the OECD for every age group in 2012 when controlling for backgrounds, it scored at or below the OECD for all age groups in 2023 (Panel B).
AI may help boost productivity and address labour shortages resulting from an ageing and shrinking workforce, but may also displace jobs. Furthermore, it is likely complementary to some high-level adult skills, such as those measured by the OECD Survey of Adult Skills (OECD, 2024[7]). In Korea, the use of AI in the workplace is increasing demand for high-level skills (including data analysis and interpretation) and social skills (OECD/Korea Labor Institute, 2025[9]). Evidence also indicates that it has so far undermined quality employment opportunities for young Korean adults. Sorting industries by their AI exposure quartiles shows that apart from social work activities, which are pushed up by ageing, net job creation has been concentrated in industries with high AI exposure, including computer programming, professional services, publishing, information services and research and development (Figure 3.3, Panel A). Job creation has benefitted core age workers (aged 30+), while those aged 29 or less have faced net job losses in these sectors (Panel B). Looking at specific sectors, there seems to be a trend break in job creation for young adults around 2022, corresponding roughly to the time of the launch of ChatGPT (Han and Oh, 2025[10]). It is too soon to conclude that this break is caused by AI, since the economy also entered a weak spot in 2022, and young adults tend to suffer disproportionately during slumps, but it harmonises with recent evidence from the United States (Brynjolfsson et al., 2025[11]). Other reasons, including an oversupply of tertiary degrees, are discussed below.
1. Employment refers to the number of subscribers to the National Pension Service. Industries have been divided into quartiles depending on their AI exposure (with Q1 being the least exposed).
2. Industries have been divided into quartiles depending on their AI exposure (with Q1 being the least exposed). Differences between the 2023 average and July 2025. The actual differences in employment have been adjusted for population changes.
Source: Author’s calculations, adapted from Han and Oh (2025[10]).
It is in the long-term interest of employers to continue hiring young people even as tasks traditionally performed by new hires can be taken over by AI. According to Han and Oh (2025[10]), junior employees in Korea typically perform codified and book-learning-based tasks, precisely the types of work AI can execute quickly. In contrast, senior workers tend to possess complementary strengths in tacit knowledge and social skills that AI cannot yet replicate, such as organisational management, contextual understanding, decision-making and interpersonal coordination. This aligns well with evidence from the OECD Survey of Adult Skills, showing that only about half of young adults (16-24) in employment in Korea regularly learn new things by doing (Pareliussen, 2026[8]). Skills that employers value in more experienced workers need to be learned on the job through experience. To secure a pipeline of talent, employers will need to continue to hire inexperienced workers, but the tasks they are given will need to change.
One reason for falling skills by age is that even though young Koreans are highly educated, the education system does not develop sufficient skills in self-directed learning and critical thinking. Huge resources are expended in inefficient competition to enter elite universities and win a golden ticket to quality employment. Almost all students participate, but only a few emerge as winners. The amount of public and private resources expended on primary and secondary education and private tutoring is reflected in strong academic performance among youth and young adults. Korea has reduced the share of 25-34-year-olds without an upper secondary qualification to only 1%. This is the lowest rate in the OECD and well below the OECD average of 13% (OECD, 2025[4]). Korea is also a high performer over time and across domains in PISA, including the “creative thinking” test introduced in 2022 (OECD, 2023[12]). Unlike many OECD education systems, Korea’s maintained a high level of performance in both 2018 and 2022 (OECD, 2025[13]).
Even so, when skills fall steeply with age, it is an indication that all the resources expended on schools and private tutors do not equip pupils with the necessary tools to continue learning as they enter adult life. Despite high overall reading performance in PISA 2018, only 25% of 15-year-olds in Korea were able to accurately distinguish fact from opinion compared to an OECD average of 47%. Furthermore, their knowledge of effective strategies for assessing the credibility of sources was also below average. These skills were less often taught in Korea than in other OECD countries. PISA data also indicate that Korean students lack confidence in their capacity for self-directed learning compared to the OECD average (OECD, 2025[13]). The findings of this chapter likely also reflect the quality of early childhood education and care (ECEC), which plays an important role in children’s agency, social skills and broad development, laying the foundations for future learning (Elango et al., 2015[14]). Korea’s ECEC system is described in the 2024 OECD Economic Survey of Korea (2024[1]).
3.2.1. High-stake exams lead to intensive tutoring
Past OECD Economic Surveys have pointed out that excessive competition in the Korean education system has its root causes in labour markets. Productivity differences between large companies, including the large family-controlled conglomerates (“chaebol”), and small- and medium-sized ones are mirrored in a dual labour market, resulting in substantial differences in pay, job security and social protection. Large business groups remain dominant in terms of national sales, and even more so in exports. These firms typically offer highly educated workers well-paid jobs, good working conditions, regular employment and social insurance coverage, but their employment share has fallen over time. Lower-productivity SMEs, often in the domestic-oriented service sector, hire a larger share of non-regular workers who earn less and have less protected jobs (OECD, 2024[1]; OECD, 2022[5]).
For previous generations, the tried and tested path to securing quality employment was education, and academic qualifications have come to be seen as the best measure of an individual’s intelligence or ability to perform a particular job. However, as educational attainment has increased more rapidly than the demand for highly educated workers, this credentialism has led to “education inflation”, which requires job candidates to obtain higher degrees for positions that formerly had lower requirements (OECD, 2022[5]). Today, Korea has the highest rate of tertiary attainment among young adults across OECD countries: 71% of 25-34-year-olds had completed tertiary education in 2024, compared to the OECD average of 48%. This is combined with one of the highest incidences of overqualification (31%) in the OECD (23% average).
While the private economic returns of tertiary degrees have fallen in general, degrees from the most prestigious universities remain valuable signals of an individual’s abilities. These institutions are mostly located in Seoul. Their graduates earn 24.6% more than graduates from bottom-tier universities at the time of labour market entry in Korea, and the wage gap peaks at 50.5% between the ages of 40 and 44 (Lee and Koh, 2023[15]; OECD, 2024[1]).
The intense competition to gain admission to these prestigious universities and thereby a ticket to quality employment lowers social returns to investments in education. It leads many students to prioritise the name of the institution over choosing a field of study according to their interests and skills. This is reflected in the highest share of workers employed in a different field from that of their highest qualification (field-of-study mismatch) in the OECD (Figure 3.4).
Share of workers who are mismatched by field of study
1. The Flemish region.
2. England.
Source: OECD (2024), Do Adults Have the Skills They Need to Thrive in a Changing World? Survey of Adult Skills 2023.
Participation in intensive private tutoring is a prime tool to get ahead in this competition, and it is positively correlated with academic achievement. Public and private expenditure to primary and secondary education is high (Figure 3.5, Panel A). Monthly average expenditure for private tutoring per student is steadily growing, and had reached roughly 10% of average household disposable income in 2024 (Panel B). Intensive tutoring has a detrimental effect on adolescent mental health (Xu and Lee, 2023[16]), and Korean youth report low life satisfaction relative to other OECD countries (OECD, 2023[17]). In a classic prisoner’s dilemma, individual parents and children nonetheless choose to participate in intensive tutoring, knowing that everyone else will.
Reliable information for students and their parents about the full picture of costs and benefits associated with entering the race for a golden ticket, including the weakening returns to tertiary degrees (see below), might make it more acceptable to pursue alternative paths such as upper secondary vocational education and training (VET). In 2022, only 16% of 15-19-year-olds in Korean upper-secondary education were in VET, compared to an OECD average of 40%. VET students are typically less socio-economically advantaged and lower performing than their general education peers, but labour-market prospects for VET graduates, particularly those participating in work-based learning, are good. The share neither in employment, education or training (NEET) among them is relatively low and average employment status and wages across the career exceed those of tertiary graduates, after accounting for family and individual characteristics (OECD, 2022[5]). Korea has put considerable efforts into expanding career guidance in initial education, and PISA data shows that the share of students who spoke with a career advisor was above OECD average in 2022 (OECD, 2025[18]). Continued efforts to provide quality career guidance to students in lower secondary education and their parents nonetheless has a key role to play, while broader information campaigns could also be envisaged.
Increasing the overall time students spend at school would create greater opportunities to develop a broad range of skills while supporting working parents and reducing both the time devoted to and demand for private tutoring. Regular instruction time within the national curriculum in Korea is 655 hours per year in primary education, compared to the OECD average of 804, and 842 hours in lower secondary, compared to the OECD average of 909 hours. The continued expansion and quality improvements of care and educational support before and after the regular school day, while offering a diverse range of programmes that reflect students’ broad interests is important in this respect. Since 2024, Korea has significantly expanded care and educational support in primary schools, and since 2026 has been promoting the further expansion of care and educational support through cooperation between schools and local communities. While these efforts form part of broader initiatives to support parents balancing childcare and full-time work, research indicates that high-quality, school-based after-school programmes also reduce demand for private tutoring and help narrow inequalities (Bae and Choi, 2024[19]; OECD, 2025[13]).
Note: Panel A shows total financing (public and private) to all educational institutions. In Panel B, private education expenditure has been deflated using CPI.
Source: OECD Education Statistics Database; Ministry of Data and Statistics.
Critical thinking should be rewarded, integrated into existing subjects and taught explicitly. A greater focus should be placed on teaching strategies for self-directed learning with an emphasis on curiosity and student well-being. Recent policy changes in OECD countries reflect growing recognition that learning quality depends on relationships. Inspiration could be drawn from Finland, which redesigned its curriculum from the 1990s to emphasise problem-solving, enquiry, collaboration and discussion, student well-being and teacher autonomy, while minimising the use of standardised tests. Other countries that have moved in the same direction include Singapore increasing the emphasis on creativity, communication, resilience and lifelong learning skills under the slogan “teach less, learn more” and New Zealand organising its curriculum around key competencies to build adaptability, reflection and social skills, in addition to content mastery (OECD, 2025[20]; OECD, 2020[21]).
The university entry exam’s central role in university admission incentivises learning-to-test – predominantly based on multiple choice – and book learning. The dual labour market characterised by substantial differences in pay, job security and social protection between regular and irregular workers is a key driver of competition in society as a whole. Competition in education is excessive and competition in the university entry exam largely reflects this. Even though it is no longer the only criterion for university entry, the College Scholastic Ability Test (CSAT,“Suneung”) remains one of the most important sorting mechanism, particularly for top-tier universities. Reforms to produce alternative pathways have therefore not had the desired effect in reducing pressure in primary and secondary education. Reducing the weight of the CSAT has increased the complexity of the admissions process, and the need to meet multiple evaluation criteria may even have increased reliance on private tutoring. One option to improve these issues is to strengthen admission processes that reflect completion of the high school curriculum at every university, including private ones.
Moving to the Seoul Metropolitan Area for studies used to be a pathway for children of less well-off families in the rest of the country to improve their economic prospects. However, the opportunity to do so is increasingly constrained by their parents’ stature due to regional gaps in income and wealth. At the same time, income gains for youth born outside of the Seoul area from attending regional hub universities have weakened considerably due to a shortage of good jobs (Lee, Chung and Ziemann, 2026[22]). Strengthening the competitiveness of flagship universities in non-SMA hub cities could help level the playing field for low-income students outside of SMA, reduce competitive pressures and improve matching (Chapter 4).
3.2.2. An increasing supply of tertiary degrees is not matched by increased quality
As tertiary education has become increasingly commonplace, the quality seems to have suffered. The difference in literacy between a tertiary degree and an upper secondary one has weakened since 2012, and is now statistically insignificant for recent graduates in Korea (Pareliussen, 2026[8]). The literacy of an upper secondary education, controlling for age, personal characteristics and participating in diverse life-long learning activities, had converged to the OECD average by the 2010s (Figure 3.6, Panel A). For tertiary graduates, there has also been an improvement over time, but improvements have been limited since the 1990s, and the gap to the OECD average remains around 11 PIAAC score points for recent graduates (Panel B).
Note: Results from an OLS regression using the repest command on PIAAC microdata from cycle 2 for all OECD countries participating in both cycles. Literacy score is the dependent variable and controls are added for the time of achieving the individuals’ highest educational attainment by level of education (completed tertiary, completed upper secondary or did not complete upper secondary). Additional controls are added for age groups, parents’ educational attainment, participation in adult education and training the past 12 months (dummy) and the incidence of learning by doing (daily, weekly, monthly or less). Education is measured by the International Standard Classification of Education (ISCED). ISCED 5A and 6 correspond to tertiary education at the Bachelor level or above. The reference group is a man aged 35-44 without children, with an upper secondary degree and with at least one parent having an upper secondary degree.
Source: Pareliussen (2026[8]).
Increasing educational attainment is also not matched by improved labour market outcomes for young adults. The average earnings premium to a tertiary education of 31% compared to an upper secondary education in 2024 remains a meaningful, even though it is below the OECD average of 54. The OECD Survey of Adult Skills indicates that the tertiary education earnings premium has fallen, especially for the oldest age groups (Figure 3.7). The employment rate for tertiary-educated young adults (25–34-year-olds) is 80%, lower than the OECD average of 87% (OECD, 2025[4]). The share of tertiary-educated economically inactive 25-34-year-old men is the second highest in the OECD at 12%, compared to the OECD average of 6% (2023). 21% of tertiary-educated women in the same age group are inactive, which is the fourth highest in the OECD (average 12%). In November 2025, nearly 1.6 million people in their 20s and 30s (12.7%) were either unemployed, not actively seeking work or preparing for employment. 359 000 were unemployed, 511 000 were preparing for employment, while 719 000 were “resting”, i.e. not actively seeking work or preparing for employment, the highest level since 2003.
Note: Panel B: Log earnings premiums of a tertiary degree relative to an upper secondary degree, PIAAC cycle 2 minus PIAAC cycle 1. Most countries participating in cycle 1 collected data in 2012-13, while some countries included in the OECD average collected data in 2015 (Chile, Israel, New Zealand and Lithuania) and 2018 (Hungary). Results from an OLS regression using the repest command on PIAAC microdata from cycle 2 for all OECD countries participating in both cycles. Log earnings is the dependent variable, and controls are added for the time of achieving the individuals’ highest educational attainment by level of education (completed tertiary, completed upper secondary or did not complete upper secondary). Additional controls are added for age groups, parents’ educational attainment, participation in adult education and training the past 12 months (dummy) and the incidence of learning by doing (daily, weekly, monthly or less). The reference group is a man aged 35-44 without children, with an upper secondary degree and with at least one parent having an upper secondary degree.
Source: Pareliussen (2026[8]).
Quality issues in tertiary education are likely related to weak funding, which may also lower the social returns from the university sector. Universities perform a key role in research and development (R&D) and act as hubs for the dissemination of innovations made on the global frontier. Furthermore, they are potentially important institutions to teach self-directed learning and critical thinking. Korean universities might not be able to fulfil these tasks fully due to relatively low spending per university student (Figure 3.5, Panel A). Public expenditure per tertiary student is USD 6 617 in Korea, less than half the OECD average (USD 15 102). Even when taking private expenditure and fees from foreign students into account, spending per tertiary student remains low (USD 14 695) compared to the OECD average (USD 21 444). This reflects a combination of low public funding and tuition fees that have fallen in real terms over time. A tuition fee freeze was in place from 2009 to 2025, and all universities are subject to a cap on annual tuition fee increases. Low expenditure per university student inevitably results in less intensive teaching per student, less time for staff to conduct research or both. In addition, as the share of youth participation in tertiary education expands, the average academic preparedness of students can be expected to decline, compounding the effects of low expenditure per student (OECD, 2025[23]).
Rapidly shrinking cohort numbers should leave some room to strengthen compulsory education as mentioned above, while also reprioritising funding from compulsory to tertiary education to allow more intensive and research-based teaching. The number of children aged 0–4 fell by 40% between 2013 and 2023 and is projected to decline by another 6% by 2033 (OECD, 2025[4]). Proactive policy planning to shrink smartly with a strong focus on the quality and labour market relevance of degrees can free resources while making sure additional investments per student make a societal return. However, such reprioritisation would require changing the current system, in which funding for primary and secondary education comes from legally mandated transfers from both central and local governments tied to tax revenue (Chapter 2). As such, spending per student tends to rise as student numbers fall (Kim, 2023[24]).
3.2.3. High-stakes tests to enter employment come with drawbacks
The strong reliance on CSAT to enter university fits into a broader pattern of frequent use of high-stakes test in the education system (OECD, 2025[13]) and to enter employment (OECD, 2022[5]; OECD, 2025[23]).The Civil Service Exam remains a key pathway to enter the civil service. To become a lawyer, it is not sufficient to graduate from law school; one also has to pass the bar exam, for which the pass rate is low, often around 50% or lower. To become a teacher, you need to pass the Elementary School Teacher Employment Exam, also with a typical fail rate of around 50%. The Secondary School Teacher Employment Exam is normally even more competitive. The fact that you can “study your way” into a job also incentivises book learning and learning-to-test over learning by doing, and they favour individuals who are good at studying for tests and taking tests, even though the correlation between test-taking skills and the task-specific skills in the job may vary. These exams contribute to postponing labour market entry and may prevent skilled individuals from practising in their field of study.
The Civil Service Exam spans a wide range of topics, and those who pass become qualified for a wide range of jobs and tasks. Requiring that each civil servant possess relevant knowledge across such a broad range may exclude talented people with high-level competence in a narrower field. The civil service is therefore increasingly using open and career-competitive recruitment, with alternative pathways accounting for roughly half of recruitments. However, preparing for the civil service exam and other exams remains a reason for young adults postponing labour market entry. The number of test-takers has come down from more than 200 000 in the mid-2010s to just above 100 000 in recent years. Only about 1-5% are hired each year depending on year and grade and 60-70% are repeat test takers. Further delegating the hiring and basing decisions closer to the operational level of the hiring institution and replacing the civil service exam with narrower, more job-relevant testing and assessment criteria could help recruit specialized individuals who are suited for specific operational roles. In many countries, including the United Kingdom, Sweden, Norway, Germany, and the United States, civil servants are generally hired through open, competitive recruitment based on how their qualifications, experience, and skills match the specific job opening.
In the case of licensed professions, entry barriers exist to compensate for information asymmetries and negative externalities, but in practice, they end up raising anti-competitive barriers. According to the OECD Product Market Regulations Indicator, Korea’s regulatory barriers are well above the OECD average for lawyers, accountants, architects and real-estate agents. New OECD evidence finds that anticompetitive regulations in professional services curb labour productivity in downstream sectors. By converging to the regulatory performance of the best-performing OECD countries, Korea could improve overall labour productivity by more than 3% (OECD, 2025[25]). A variety of systems exist across the OECD. Empirical evidence tends to find that such regulatory barriers are poorly aligned to the information asymmetries and negative externalities they are meant to counteract, and that there is no correlation between high barriers and quality of services (Vitale, C; Bitetti, R, 2026[26]). For example, in the case of law, many countries require passing a bar exam, like Korea, but this is not the only viable model. In contrast, medical doctors need a medical degree and a period of work experience as a resident doctor in most countries, including Korea. In Norway, becoming a licensed lawyer requires a law degree, a period of residence, and a mandatory class on various ethical, practical, and economic aspects of practising law (“Advokatkurset”). These alternative systems can provide the necessary level of quality assurance while avoiding the mobility barriers and waste of human capital associated with the current system in Korea.
In the private sector, hiring practices are gradually shifting towards valuing a broader set of skills, including work practice. Many private sector employers, notably larger firms, apply their own entry exams, and this has been an important way into quality employment for young adults. However, their share of recruitments has fallen in favour of rolling recruitment of experienced workers. For now, this trend is one of the factors holding back job prospects of young adults, along with weak growth in the past few years and the possible displacement effect from AI discussed above (Lee, 2026[27]). This shift is welcome as it should lead to better matches and increased labour mobility going forward. There is, nonetheless, a risk that youth will continue to compete for a diminishing pool of quality jobs offered under the old system instead building a broader set of skills demanded by employers. The government has responded to the situation by expanding measures to promote youth employment under the umbrella of the Youth Employment First Step Guarantee, announced in September 2025. This initiative aims to provide tailored support based on individual circumstances, including identifying “resting” youth and helping them regain motivation to seek employment support for job-seeking youth. It also seeks to foster workplaces free from wage arrears, industrial accidents, and harassment for youth. It also increased job-seeking allowances to support stable job search activities among youth and provides financial incentives for those employed in SMEs and mid-sized firms outside the Seoul Metropolitan Area.
A second key to unlocking Korea’s human capital potential is to ensure that skills are effectively used by assigning workers challenging tasks, continuously upgrading their capabilities through lifelong learning and supporting labour mobility that matches skills with labour market needs. Empirical evidence points to solid gains in productivity and earnings from work-related and sector-focused training programmes (OECD, 2025[6]). In Korea, as in the rest of the OECD, adult education and training, and learning-by-doing are key activities for building and maintaining adult skills. Those who regularly learn by doing score approximately eight points higher on literacy in the OECD Survey of Adult Skills than those who do not, compared to the OECD average of four (Figure 3.8, Panel A).
Literacy adjusted for personal characteristics and backgrounds
Note: The literacy premium is estimated in an OLS regression using the repest command on PIAAC microdata from cycle 2 for all OECD countries participating in both cycles. Literacy is the dependent variable. Independent variables include the incidence of learning by doing and participation in adult education and training. Controls are included for 10-year age-gender cohorts, parental status (by gender), education level, literacy skills and work experience (relative to age). Education is measured by the International Standard Classification of Education (ISCED). ISCED 5A and 6 correspond to tertiary education at the Bachelor level or above. The reference group is a man aged 35-44 without children, with an upper secondary degree and with at least one parent having an upper secondary degree.
Source: Pareliussen (2026[8]).
The literacy premium of those who had participated in adult education and training in the 12 months preceding the survey is nine points, which is lower than the 16-point OECD average but still considerable (Panel B). Korea is implementing a range of policy measures to prevent the deterioration of adult skills, with a particular focus on strengthening vocational skills (Box 3.2).
In 2022, Korea’s “Workers’ Vocational Skills Development Act” was amended and renamed as the “National Lifelong Vocational Skills Development Act,” thereby laying the legal foundation for expanding the scope of vocational adult education and training from employees to all citizens.
The “National Tomorrow Learning Card“ enables people aged 15 to 74 to select and pursue training courses of their choice. The government has expanded eligibility to the programme over time and is in parallel supporting training on new technologies through initiatives such as the K-Digital Training and K-Digital Credit.
In 2025, the government announced the “Labour Market Plan on AI Talent Development (AI+ Competency Up)”, a programme to train workers in AI-related skills and integrate AI competencies across the workforce. Eligibility is broadly defined, with priority given to groups most at risk of skills gaps caused by AI adoption, including youth, workers in industries undergoing technological change and mid-career workers needing reskilling.
The government is also supporting SME’s training costs and tailored consulting services. Through the Mutual Growth Consortium Training Programme SMEs can access and benefit from the advanced training infrastructure and programs of large enterprises. In 2025, the government introduced the SME Worker-Led Training Programme, which reimburses SMEs enrolling workers in training courses provided by private institutions.
Korea Polytechnics, a public vocational training institution, provides free vocational training to vulnerable job-seeker groups including women, migrants, the middle-aged and elderly through its more than 40 campuses nationwide. Youths with college degrees, can access the Hi-Tech Training Programme to prevent skills stagnation promote specialisation in emerging technologies.
The Smart Training Education Platform (STEP) is a public online vocational training platform. Its core programmes, integrating training from basic to advanced levels, have been continuously expanded from three programmes in 2022 to 21 programmes and 74 courses in 2025.
Source: Ministry of Employment and Labour.
Yet, the incidences of learning by doing and adult education and training are considerably lower in Korea than in the OECD average. Just above half of working Koreans learn new things by doing at least once a month, which is considerably less than the OECD average of more than 70% (Figure 3.9, Panel A). The incidence of learning-by-doing is particularly low for young working adults aged 16-24, but remains well below the OECD average for all age groups (Pareliussen, 2026[8]). The share of the population that participated in adult education and training in the past 12 months is the lowest in the OECD (Panel B).
Source: Pareliussen (2026[8]).
3.3.1. Labour market institutions hold back private incentives to invest in skills
Work-related training in Korea is commonly used as a reward or to strengthen employee retention and commitment, rather than being fully based on a company’s human capital needs (Ban et al., 2020[28]). Furthermore, there is a large gap in training participation between small and large companies compared to other OECD countries. The attitudes of business owners and SME managers are not always supportive of training. 63% of SME workers who would have liked to participate in (more) training but did not, cite lack of time as a key barrier, a higher share than in any other OECD country (OECD, 2020[29]). A high reliance on external training providers funded by government programs often leading to generic training not closely aligned with firm-specific production needs is a potential reason why the quality of training seems to be lower than in the OECD average (Kim et al., 2024[30]). Low returns to training can in cement attitudes that training is primarily a reward rather than productive investment.
Incentives to invest in skills for firms are reduced by a relatively short duration of many employment relationships. A dual labour market with limited mobility from irregular (more prevalent in SMEs) to regular employment (more prevalent in large companies) increases turnover among irregular workers who move between low-quality jobs, who do not build firm-specific capital and as a result face difficulties in climbing the ladder to more productive matches (Ban et al., 2020[28]; Ban et al., 2018[31]). Young workers, who tend to gain the most from switching jobs across the OECD (OECD, 2025[6]), are instead postponing labour market entry rather than accepting low-quality employment. Many use the time to improve their credentials, searching for jobs and preparing for various exams qualifying them for quality employment. However, a considerable share is neither in employment, education or training (OECD, 2022[5]).
A combination of labour market institutions, gender norms and gaps in family policies often leads to extended career breaks for mothers, after which many end up in irregular employment. Expectations of career breaks become a self-fulfilling prophecy due to discrimination by private-sector employers, manifested in the largest gender pay gap in the OECD (Pareliussen et al., 2025[2]). Potential measures to reduce the gender pay gap include further strengthening sanctions for workplace discrimination and the capacity of the labour inspectorate to follow up and strengthening pay transparency measures. Korea has strengthened workplace inspections, supported by capacity-building and the deployment of “Equal Employment Counsellors”. While gender pay reporting is mandatory, it only applies to large firms. Among the 21 OECD countries that mandate gender pay reporting in the private sector, Korea and the United Kingdom are the only ones that do not request more detail than an aggregate, company level estimate of the wage by gender. Mandating equal pay auditing processes, as practiced in many other OECD countries, including Canada, Finland, France and Sweden, would also help (OECD, 2024[1]). In Korea, legislative proposals are currently under discussion to strengthen pay transparency. This would mandate that public enterprises and private companies above a certain size submit data to the Minister of Gender Equality and Family on the status of male and female employees and wages, disaggregated by occupation, job level, and type of employment. The Minister would be required to analyse this data and publicly disclose wage and employment information by company and by industry. The proposal would also require employers whose share of female employment falls below a specified threshold to establish and submit an affirmative action implementation plan.
Expanding social insurance enrolment and training for non-regular workers, while simultaneously enhancing labour market resilience - such as by relaxing employment protection for regular workers and lowering the uncertainty related to job separation to ease the burdens associated with hiring workers on regular contracts and promoting flexible working arrangements and job-to-job mobility - would also reduce precariousness, improve matching and reduce skill gaps (OECD, 2018[32]; OECD, 2020[33]).
Incentives for firms to invest in employee training and skill acquisition also decline for older workers, including those in regular employment. Pay and career progression, notably in large companies, remain largely based on seniority, leading to early “honorary” retirements (or resignations) of regular workers around the age of 50 through a combination of pressure and severance packages. As wage growth outpaces productivity growth over the career retaining older workers becomes increasingly costly. Older workers keep working as a matter of necessity and due to social norms, but often need to embark on second careers or are re-employed in positions offering reduced wages compared to their previous roles (OECD, 2022[5]). Key reforms to improve the situation include breaking down labour market dualism, transitioning from a seniority-based system toward a job-based system reflecting job characteristics and values such as the level of difficulty, responsibilities, required skills and performance, and aligning the pensionable age with the retirement age, while strengthening family- and anti-discrimination policies (Table 3.1).
The seniority wage system is strongly supported by regular employees and trade unions, especially in large companies, because it favours insiders in regular employment (OECD, 2018[34]; OECD, 2024[1]). Policy makers have few direct tools to intervene in wage-setting arrangements, but can lead by example, and – in cooperation with social partners – sponsor sectoral model agreements to support change. Such tripartite co-operation should include anchoring wage-setting practices in the National Competency Standards – a classification of jobs into various categories with associated specific competencies in terms of skills, knowledge and aptitude – and ensure fair pay for workers related to their job requirements and skills. Sectoral model agreements following these principles could help raise awareness and understanding of the new criteria and the mutual benefits from using them (OECD, 2018[34]).
A less tangible reason for the low incidence of learning by doing is Korea’s hierarchical management structures and a high degree of deference to authority (Ban et al., 2020[28]; Ban et al., 2018[31]) . The government, as an employer, can showcase innovations to promote learning by doing, encourage critical thinking and avoid groupthink. Introducing structures in the public sector that explicitly reward employees from diverse backgrounds, ages, and tenure levels for sharing their views and ideas on organisational and operational matters could be a step towards such a cultural change. A second potential route could be to explicitly reward managers for delegating to their staff greater freedom in solving tasks and thereby giving them more responsibility for the end result. This would help offset the current practice whereby junior employees typically perform codified and book-learning-based tasks (Han and Oh, 2025[10]). Such approaches could be integrated into efforts to tilt career progression away from tenure and more towards performance. If successful, such mechanisms could be promoted as a blueprint also for private sector employers to follow.
3.3.2. Realising social returns of investments in skills require coordination
Improving incentives to invest in skills in existing employer-employee relationships would be helpful, but is not a sufficient condition to realise the social benefits of investments in skills. Such investments need to be coordinated to realise positive spillover effects at the sectoral, local and national levels. Government involvement is therefore warranted.
Public subsidies are used to support investments in adult skills in practically every OECD country. Active involvement of social partners can align such investments better to labour market needs. In Sweden, the new Student Finance for Transition and Retraining Programme has significantly increased experienced workers’ rights to go on paid education leave. It offers grants of up to 80% of the wage for up to 44 weeks for full-time studies, or longer for part-time studies. The subsidy is capped, but student loans are available to top up financing up to 100% of the previous wage (also subject to a cap). The programme was designed through collective agreement but is largely financed by the government. It is administered by the Swedish Board of Student Finance, with job security councils established by collective agreement as important gatekeepers. The programme has rapidly gained popularity and puts Sweden at the forefront among OECD countries in offering adults the possibility to up-skill and re-skill, even though scope remains to target the programme better to those who need it most (OECD, 2025[23]). Other notable examples are Germany, where firms can receive subsidies covering between 25% to 100% of expenses associated with staff training depending on the company size and the characteristics of workers. In Austria, employers can obtain 50% of the training fees up to a limit of EUR 10 000 per person for certain groups of workers, including individuals above the age of 50. In Poland, SME employers can get up to 80% of their employee training costs covered from the National Training Fund, rising to 100% for microenterprises. Priority is given to training workers who are 45 years old or older (OECD, 2025[6]). In Korea, the Employment Insurance training subsidy covers expenses associated with staff training ranging from 40 to 100% depending on company size. It is a nationwide scheme run by the Ministry of Employment and Labor financed through employment insurance contributions.
Regional and local governments are important providers of adult education and training. Regional governments (25%) and local governments (67%) cover most of the costs of subnational adult learning policies, while the national government (7%) and subnational education offices (1%) play only a minor financing role. Access to adult education and training, its quality and incentives to participate remain unequal across the country. The Ministry of Education mainly supports subnational governments in lifelong learning through the Lifelong Learning City Programme. The national funding has to be 100% matched by the local government, and the expectation is that the local government will continue to invest in adult learning in the subsequent years (OECD, 2021[35]). A government-commissioned survey-based evaluation found that in 2024, local governments manage 99% of projects, accounting for 69% of the total reported funding of KRW 603.5 billion (USD 405 million).
The governance and financing of the adult learning system could be improved. As in other OECD countries, a variety of ministries, local governments and different stakeholders have some responsibility for adult learning. Streamlining the governance and financing of the adult learning system and better involving social partners are policy priorities (OECD, 2020[29]). In recent years, efforts have focused on strengthening monitoring systems, standardising reporting formats and enhancing interministerial coordination mechanisms. Since 2020, the Ministry of Education has operated an evaluation framework for Lifelong Learning Cities in which each city is review once over a three-year cycle. The process provides a structured assessment of governance and performance management at the municipal level. The evaluations illuminate the diversity of the ecosystem and identify the need for more consistent legal and structural definitions, improved data quality and performance metrics and stronger alignment among ministries and local governments (National Institute for Lifelong Education, 2026[36]).
Since 2002, statutory 5-year National Lifelong Learning Promotion Plans set out the mid- and long-term policy objectives and directions for lifelong education. The Fifth Lifelong Education Promotion Plan (2023-2027) involves expanding the role of universities and empowering local governments to identify lifelong learning needs and policy responses matched to their context, including through collaboration with universities and industry. To ensure responsiveness to national challenges and regional disparities, the Lifelong Education Promotion Committee’s remit for vertical and horizontal collaboration needs to be expanded through establishing formal mechanisms to contribute to the Social Affairs Ministerial Committee, and integrate and build on consultation with sub-national lifelong education promotion councils (OECD, 2021[35]). The centralised system of intergovernmental transfers, with limited local discretion and weak links between tax effort and spending autonomy, may also stand in the way of funding of locally adapted solutions (Chapter 4).
In corporatist countries like the Nordics and Germany, skills development at the sector level is often part of the social dialogue and may be enshrined in collective agreements. In Korea, wage bargaining is conducted at the company level, while unionisation is at 13% below the OECD average and unions are mainly composed of regular employees. Collective bargaining will, in this situation, tend to put too little weight on sectoral spillovers of investments in skills. Moving collective bargaining to the sector level, as envisaged by the current administration, could help coordinate investments in skills, but should be carefully planned and implemented. Commonly agreed rules of engagement for social action and mechanisms to avoid further cementing insider-outsider dynamics and wages undermining competitiveness should be considered. Common interests at the sectoral level, like skills development, should be explicitly put on the agenda from the beginning.
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