Korea’s approach to address employment gap - Korea’s Growth Strategy- Kwang-Yeol Yoo Ministry of Strategy and Finance June 2014

Contents I.Economic Trend and Labor Market Conditions II.Holistic approach towards Employment Policy in Korea’s Growth Strategy III.Customized approach towards Employment IV.Implication

I -1. Economic Trend with a focus on Labor Supply 1 √ (Structural challenge) Shrinking labor force → Korea faces the most rapid population aging among the OECD countries and is projected to see the decline of economically active population from √ (Implication) Unless measures are taken, potential growth rate will fall to 3% due to shrinking labor force, over the coming years. Potential Growth Source: IMF, How can Korea Boost Potential Output to Ensure Continued Income Convergence (IMF working Paper, ) Population Trend 2017 ※ Persons 65+ as percentage of total population : (‘00) 7.2% → (’13) 12.2% → (’18) 14.3% → (’26) 20.8% (aged society) (ageing society) (super-aged society)

2 I -1. Labor Market Conditions √ (Use of labor force) The overall employment rate is on the plateau, at 64% and the employment rate of female and young population, in particular remains low. - (Female) OECD Average 69.1 % vs Korea 53.1 % (ages 15~65) ※ Female by age groups : (20~29) 58.7% → (30~39) 53.7% → (40~49) 64.9 % - (Youth) OECD Average 39.5 % vs Korea 23.1 % (ages 15~24) Trends in Employment Rate Comparing Employment Rate (2011. %) Male Female Youth (Ages 15~24) Overall (Ages 15~65) Elderly Middle- aged Korea

Supply-side Demand-side II. Holistic approach towards Employment Policy in Korea’s Growth Strategy 3 Holistic Approach → formulation of comprehensive employment policy with a balance between policies on demand for and supply of work force Competition Employment - Stimulate female employment - Stimulate youth employment - Promote flexible work hours - Address the labor market dualism Investment - Boost Infrastructure Investment - Boost Ventures and Start-ups etc. Trade - Engaging Further FTA etc. Others - Promote “Creative Economy” (Innovation New Growth Engine) - Ease Entry Barriers and Business Regulation in Service Sector etc.

III -1. Challenges in the Korean labor market and causes 4 √ Reflecting stages of development in labor market and demographic trends → Korea takes a customized approach in accordance with conditions of labor market ① Low female employment rate ③ Long work hours ② Low youth employment rate ④ Labor market dualism Career discontinuation in related to pregnancy and childbirth Giving up on job search due to burden from childcare Re-employment difficulties due to career- break Job skills not matching demand from businesses Academically overqualified Skewed toward irregular workers Maximum work hours by the OECD (Korea 2,092hr/yr VS OECD average 1,705 hr/yr) Gaps in conditions between regular and non-regular workers √ Korea aims to reach 70% employment rate by 2017

III -2. Customized approach towards Employment √ Focus on policy increasing employment of female and young work force. Support working women in every stage of their life (Employment rate target : (‘13) 47.7 % → (‘17) 61.9%) Support youth in every stage of employment (Employment rate target : (‘13) 39.7 % → (‘17) 47.7%) (Pregnancy & Childbirth) Increasing benefits of childcare leave (Childcare) Diversifying childcare service offerings (Re-employment) Providing 10% of tax reductions for labor costs to SMES that hire women who suspended their careers for family-related reasons (Vocational Education) Introducing the apprenticeship education program like Switzerland (Employment) Increasing the opportunity for internship programs of 12 public institutions, Spreading the culture of "work first, study later." (Continuous service) Increasing subsidies for youth who were first hired as interns at SMEs and then converted to regular status 5

IV. Implication 6 Customized employment policies Formulation of comprehensive employment policies by closely linking employment, investment, trade and competition. Well-balanced policies on demand for and supply of labor force needs to be reflected in growth strategy. Growth strategy and holistic employment policies Each country needs to tailor its employment policies based on analysis on conditions of its labor market and major issues it faces. Improvement of policy measures via peer review with countries with similar circumstances would be possible and important

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