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Labor market duality is a complex and critical issue for many countries that can lower productivity, contribute to inequality and result in negative externalities. In this paper, I study duality in the Korean labor market and analyze its sources and potential policy options. I find that employment protection legislations and large productivity differentials are the key drivers of Korea’s duality. In addition, applying a general equilibrium search-and-matching model and calibrating it to the Korean economy, I show that well-calibrated flexicurity policies can significantly reduce duality and inequality and raise welfare and productivity. Notably, the introduction of all three pillars—flexiblity, a strong safety net and active labor market policies—is critical for its success. If only one pillar is introduced it can result in negative side-effects and might not reduce duality.
Labor market duality is a complex and critical issue for many countries that can lower productivity, contribute to inequality and result in negative externalities. In this paper, I study duality in the Korean labor market and analyze its sources and potential policy options. I find that employment protection legislations and large productivity differentials are the key drivers of Korea’s duality. In addition, applying a general equilibrium search-and-matching model and calibrating it to the Korean economy, I show that well-calibrated flexicurity policies can significantly reduce duality and inequality and raise welfare and productivity. Notably, the introduction of all three pillars—flexiblity, a strong safety net and active labor market policies—is critical for its success. If only one pillar is introduced it can result in negative side-effects and might not reduce duality.
While the Korean unemployment rates are currently among the lowest in OECD countries, the labor market duality and the underemployment in some segments of the population are important labor market challenges, and factors contributing to lower potential growth. The paper shows the benefits of comprehensive policy reforms aimed at increasing labor force participation and youth employment and reducing duality are likely to be considerable in the medium term.
Reviews the evolution of economic growth and trends in social development during the period between 1948 and 2009.
Millions of ethnic Koreans have been driven from the Korean Peninsula over the course of the region’s modern history. Emigration was often the personal choice of migrants hoping to escape economic and political hardship, but it was also enforced or encouraged by governmental relocation and migration projects in both colonial and postcolonial times. The turning point in South Korea’s overall migration trajectory occurred in the late 1980s and early 1990s, when the nation’s increased economic prosperity and global visibility, along with shifting geopolitical relationships between the First World and Second World, precipitated a migration flow to South Korea. Since the early 1990s, South Korea’s foreign-resident population has soared more than 3,000 percent. Homing investigates the experiences of legacy migrants—later-generation diaspora Koreans who “return” to South Korea—from China, the Commonwealth of Independent States, and the United States. Unlike their parents or grandparents, they have no firsthand experience of their ancestral homeland. They inherited an imagined homeland through memories, stories, pictures, and traditions passed down by family and community, or through images disseminated by the media. When diaspora Koreans migrate to South Korea, they confront far more than a new living situation: they must navigate their own shifting emotions as their expectations for their new homeland—and its expectations of them—confront reality. Everyday experiences and social encounters—whether welcoming or humiliating—all contribute to their sense of belonging in the South. Homing addresses some of the most vexing and pressing issues of contemporary transnational migration—citizenship, cultural belonging, language, and family relationships—and highlights their affective dimensions. Using accounts gleaned through interviews, author Ji-Yeon Jo situates migrant experiences within the historical context of each diaspora. Her book is the first to analyze comparatively the migration experiences of ethnic Koreans from three diverse diaspora, whose presence in South Korea and ongoing relationships with diaspora homelands have challenged and destabilized existing understandings of Korean peoplehood.
Korea is facing mounting economic challenges. Productivity growth has been on a trend decline amid demographic headwinds, while the societal demand for inclusive growth has been on a steep rise. Furthermore, the government-led unbalanced growth model—which served Korea well in the past—has become less effective and politically palatable in recent years. As such, Korea needs a major paradigm shift to embark on a new sustainable and inclusive growth path. But policy response has been modest at best with no major reforms being implemented over the past two decades. We propose a paradigm shift in Korea’s economic framework, involving a simultaneous big push for greater economic freedom and stronger social protection within the parameters set by long-run fiscal sustainability. We also provide a detailed account of structural reforms to boost economic freedom and sustainable funding plans for stronger social protection.
This paper examines structural challenges facing the Korean labor market and analyzes the macroeconomic effects of potential labor market reforms. Our cross-country empirical analysis finds that easing of employment protection legislation tends to have positive macroeconmic effects during periods of strong growth but could turn contractionary in periods of slack. By contrast, increased spending on active labor market policies and reductions to the labor tax wedge tend to be more effective in periods of slack. Our analysis thus highlights the importance of considering economic and policy conditions when designing labor market reforms. Under the current disinflationary policy stance, the government’s focus on the working hour reform seems appriorate. With growth recovering, deregulation to reduce employment protection for regular workers can also be considered, combined with targeted support to vulnerable groups.
Currently, Japan has the highest old-age dependency ratio of all OECD countries, with a ratio in 2017 of over 50 persons aged 65 and above for every 100 persons aged 20 to 64. This ratio is projected to rise to 79 per hundred in 2050. The rapid population ageing in Japan is a major challenge for achieving further increases in living standards and ensuring the financial sustainability of public social expenditure. However, with the right policies in place, there is an opportunity to cope with this challenge by extending working lives and making better use of older workers' knowledge and skills. This report investigates policy issues and discusses actions to retain and incentivise the elderly to work more by further reforming retirement policies and seniority-wages, investing in skills to improve productivity and keeping up with labour market changes through training policy, and ensuring good working conditions for better health with tackling long-hours working culture.
Both Japan and Korea are trying to boost female labor force participation (FLFP) as they face the challenges of a rapidly aging population. Though FLFP has generally been on a rising trend, the female labor force in both countries is skewed towards non-regular employment despite women’s high education levels. This paper empirically examines what helps Japan and Korea to increase FLFP by type (i.e., regular vs. non-regular employment), using the SVAR model. In so doing, we compare these two Asian countries with two Nordic countries Norway and Finland. The main findings are: (i) child cash allowances tend to reduce the proportion of regular female employment in Japan and Korea, (ii) the persistent gender wage gap encourages more non-regular employment, (iii) a greater proportion of regular female employment is associated with higher fertility, and (iv) there is a need for more public spending on childcare for age 6-11 in Japan and Korea to help women continue to work.