2. The future of work and skills

This chapter discusses how labour markets are changing in Korea and policies to make them more inclusive. It does so from the perspective of two ongoing international mega-trends with the potential to significantly alter the nature of work in OECD countries and in Korea: technological progress and demographic change. Together, these trends are likely to affect the quantity and quality of available jobs, as well as how and by whom they will be carried out.1

On the positive side, the chapter finds that, as in other OECD countries, the future of work will create unparalleled opportunities in Korea. New technologies and markets will generate new and more productive jobs. The ability to unbundle jobs into smaller tasks will allow work to be carried out more efficiently on a truly global, digital assembly line. Increased flexibility for workers will provide greater opportunities for under-represented groups such as women, youth and older workers to participate in the labour market.

However, rapid technological progress, increased globalisation and demographic change may also pose threats. Significant upheaval is likely as jobs are destroyed in some areas, even as others emerge elsewhere. Adjustment costs may be heavy and are more likely to be borne by the least skilled and most disadvantaged. Combined with increased globalisation and a general increase in the demand for skills, these trends may further exacerbate inequality.

Moreover, emerging forms of work are raising concerns about the quality of jobs being created. Without immediate policy action they can deepen the income and well-being disparities that stem from the dualism of the labour market between regular and non-regular workers, which is a pre-existing structural challenge. The parallel increase in demand for skilled labour will be even more difficult to address without comprehensive policy changes to tackle labour market segmentation.

The chapter begins with an overview of the mega-trends affecting labour markets in Korea. It then examines the interactions of the mega-trends with other labour market concerns that are not new to Korean policy-makers: the dualism of the Korean labour market and the lack of opportunities for up- and re-skilling of the Korean working population. This is followed by a detailed look at four groups that are under-represented in the Korean labour market: women, youth, older workers and immigrant workers.

Policy recommendations for fostering the development of an inclusive labour market in Korea are elaborated throughout the chapter and are focussed on four areas:

  • Breaking down dualism requires a comprehensive strategy that should encompass relaxing employment protection for regular workers and making it more transparent while increasing social insurance coverage and training for non-regular workers.

  • Strengthen enforcement of the remedial process to redress discrimination in terms of wages and working conditions against non-regular workers who perform tasks similar to regular workers in the same firm.

  • Use the statutory minimum wage as a tool to raise wages at the bottom of the wage ladder without pricing low-skilled workers out of jobs, while ensuring the coordination with the Earned Income Tax Credit (EITC).

  • Strengthen the density and coverage of collective bargaining and the inclusiveness of social protection systems by promoting higher coverage and establishing the protection system of fundamental labour rights for specific groups of workers in emerging “grey zones” of labour laws (e.g., dependent self-employed and platform workers).

  • Build an effective system of lifelong learning based on National Competency Standards (NCS) to ensure that workers can use and upgrade their competences throughout their working lives.

  • Strengthen the existing system of financial incentives for large companies, business associations and universities to set up consortia for sharing know-how, equipment and training facilities with SMEs.

  • Remove time-related obstacles to the take-up of training programmes, including through enforcing adjustments in working hours, to ensure that the lowest skilled are as likely as the highest skilled to participate.

  • Consider the development of an individualised training account to enable workers to transfer their training rights when they change jobs, in a context where career paths are increasingly non-linear.

  • Women

    • Strengthen and encourage the uptake of maternity and parental leaves and continue efforts to cover parents who are not eligible under the current Employment Insurance (EI) system.

    • Monitor closely the quality of early childhood education and care, which has developed rapidly in the recent past, by establishing national standards.

    • Facilitate women’s return to work after an absence from the labour market without devaluation of their skills, through well-tailored job counselling and vocational training.

    • Prevent women’s career breaks during child-bearing and child-raising periods by enhancing workplace and work time flexibility for both mothers and fathers. For example, opportunities to work part-time with remuneration proportional to that of workers on full-time regular contracts could be expanded.

  • Youth

    • Increase the effectiveness of career guidance to help youth make good choices about their education by better training counsellors and incorporating career-relevant material in all subjects in secondary curricula.

    • Continue efforts to diversify vocational education options to attract more young people, while taking stock of the experience of the most successful Meister schools to create a template for the promotion of quality improvements in secondary vocational education.

    • Encourage initiatives to improve and deepen the connections between VET institutes and the business sector and to expand apprenticeship programmes.

  • Older workers

    • Accelerate the adoption of the wage peak system whereby the employer commits to maintaining older workers in their jobs in exchange for a wage cut that is partly compensated by government subsidies granted to the employee.

    • Expand training opportunities for low-skilled older workers.

    • Continue efforts to broaden the coverage of the Basic Livelihood Security Programme (BLSP) by phasing out the family support obligation, and increasing the value of the programme, while keeping focus on the elderly with the lowest incomes.

    • Expand company pension schemes and strengthen pension scheme coverage for self-employed and non-regular workers.

  • Immigrant workers

    • Continue efforts to strengthen incentives for companies to improve working conditions of migrant workers, particularly by enforcing incentive mechanisms of the Points-Based System.

    • Adapt migration programmes to ensure that they better match labour migration to skill needs.

  • Enable displaced workers to move quickly into jobs, using a mix of general and targeted income support and re-employment assistance combined with prevention and early intervention measures.

  • Accompany innovation in new forms of employment with policies to safeguard job quality by avoiding abuse, creating a level-playing field between firms, and providing adequate protection for all workers regardless of employment contract.

  • Facilitate inclusive dialogue with social partners and other relevant stakeholders and, where necessary, adapt today’s labour market, skills and social policies to emerging needs.

  • Put in place an evaluation framework to assess progress with implementing a comprehensive policy package to support more equal labour markets in Korea.

  • Strengthen efforts to ensure the collection of reliable data by national statistics agencies, for example introducing an ad-hoc module of “platform workers” under the national labour force survey.

  • Undertake peer learning, peer reviews and experience-sharing initiatives to support the dissemination of good practices with the participation of all relevant actors.

Technological advances are automating an increasing number of tasks traditionally performed by humans. Initially, automation focused primarily on routine tasks (e.g. clerical work, bookkeeping, basic paralegal work and reporting), but with the advent of Big Data, artificial intelligence (AI), the Internet of Things and everincreasing- computing power (i.e. the digital revolution), non-routine tasks are increasingly likely to become automated.

The diffusion of industrial robots perhaps best epitomises technological penetration and fears of job automation in the workplace. Robots have been used for decades, but their diffusion has recently accelerated and spread beyond the manufacturing sector. For example, supermarkets have started to employ robots as shop assistants, and Amazon and others retailers are piloting cashier-less stores. Data from the International Federation of Robotics show that orders of industrial robots increased threefold between 2003 and 2015, and the trend is projected to accelerate further (Figure 2.1).2

Among the countries that account for the bulk of robot use worldwide (those shown in Figure 2.2 make up about three-quarters of the world total), industrial dissemination of robots is relatively skewed towards the automotive sector. International comparison shows that Korea stands out for very strong dissemination of robots in both the automotive sector and (particularly) in electronics. Use of robots in these two sectors picked up in 2009 and has remained very strong. As of today, more than four-fifths of the approximately 260 000 robots currently used in Korea are in the automotive and electronic sectors.

Analysing the task content of individual jobs, the OECD estimates that the share of jobs at high risk of automation (i.e. those with at least a 70% probability of being automated) is only around 14% on average across the OECD (Figure 2.3). Figures for individual countries range widely from 6% in Norway to 34% in the Slovak Republic. At 10%, Korea’s share is not significantly lower than the OECD average. These figures only capture potential job destruction and do not account for the (possibly larger) number of jobs that technology will generate (OECD, 2019[1]). While certain jobs may disappear, others will emerge and a sharp decline in overall employment is unlikely in the OECD. Korea appears to be following a similar pattern.

Nevertheless, a large share of existing jobs may change substantially in the way they are carried out. An estimated 32% of jobs on average across the OECD may see a large share of their tasks automated, while entirely new tasks may arise (Figure 2.3). For Korea this share is 33%. The analysis also highlights that the risk of automation is higher among low-skilled workers, which may further widen disparities in the labour market (Nedelkoska and Quintini, 2018[2]).

Technology-related job changes are occurring against the backdrop of rapid population ageing, which is particularly fast in Korea (Figure 2.4). In 1980, there were seven persons aged 65 and over for every 100 people of working age (20-64) in Korea, but this number had more than doubled by 2015. Between 2015 and 2050, the dependency ratio is projected to more than triple, implying that Korea will be the most aged population in the OECD region (with Greece, Italy, Japan, Portugal and Spain).

Largely as a result of technological advances that increase productivity and living standards and raise 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, which is above the OECD average level of 80 years. Going forward, scientists anticipate that new gene-editing technologies could lead to further improvements in the diagnosis and treatment of diseases, leading to even longer life expectancies (Broad Institute, 2018[6]; Sanders, 2016[7]). Stronger global research networks and the diffusion of knowledge will likely allow these advances to reach an ever greater share of the global population as incomes and access to healthcare increase in emerging economies.3

These demographic trends affect the labour market in terms of technology adoption and consumption patterns. In countries with ageing populations, shortages of qualified labour may arise as the number of retiring older workers outpaces the number of young people entering the labour market. In turn, this could possibly fuel demand for automation or stronger pressure to attract immigrant workers. Acemoglu and Restrepo (2017[8]), show that countries with the most rapidly ageing populations have also adopted industrial robots particularly fast, suggesting that an ageing population may not necessarily be a harbinger of slower economic growth. Ageing will also have a direct impact on consumption: demand is likely to shift from durable goods (such as cars) towards services (such as healthcare). As preferences adjust, so too will trade and the relative importance of different industries.4 All of these factors will have an impact on skill demands and the types of jobs that will be created.

As people live longer across the world, and fertility rates remain high in a number of developing countries, the global population is expected to increase. According to the United Nations’ 2019 World Population Prospects, the expected global population will be 9.7 billion in 2050, a 26% increase from 7.7 billion today. Whereas developing countries will account for the bulk of this increase, the population of OECD countries is expected to increase by less than 10%, from 1.3 billion to 1.4 billion people.

Thus, depending on infrastructure, economic opportunity, and policy choices, migration flows may radically change the makeup of the population in Korea as in other advanced economies. For example, over half of college-educated STEM workers in the Silicon Valley are foreign born (Melville, Kaiser and Brown, 2017[9]). In 2017, about 258 million people around the world were living outside their country of birth. About half of these migrants were living in OECD countries (OECD, 2018[10]), and more than 5 million people settled in those countries permanently. In addition, more than 4 million temporary foreign workers were recorded in OECD countries in 2016, in order to fill skills shortages, and more than 3 million international students are enrolled in a higher education establishment in an OECD country.

Given the context of widening demographic imbalances, migration flows may further intensify in the coming decades, posing fundamental policy challenges. With respect to the issues addressed in this chapter, while migrants may help countries with ageing societies to overcome skill shortages, they may also be exposed to some risks, notably as they are often employed in automatable jobs (OECD, 2017[11]) or in low-skilled occupations, despite their relatively high educational level (OECD, 2018[10]).

As discussed in Chapter 1, the Korean economy faces several challenges to achieve inclusive growth. From a labour market perspective, this situation is captured by the presence of very high wage inequalities. One in five full-time workers in 2018 earned less than twothirds- of the median wage, belonging to the upper half in the OECD, and wage dispersion was one of the highest (Figure 2.5). One important source of concern regards the quality of jobs. Indeed, coping with the dualism of the labour – as depicted by large differences in employment conditions between regular and non-regular workers – stands out as a key policy priority in Korea. Important concerns also stem from the need to improve the learning system as a way of equipping the most vulnerable to navigate a changing labour market. The emergence of new jobs could compound these challenges even further if they are not addressed through immediate actions.

Segmentation of the Korean labour market dates back to the aftermath of the 1997 economic crisis (Korea Development Institute, 2010[12]; Yoo, 2009[13]; Keum, 2018[14]). Over time, it has fed broader policy concerns about rising income inequality and unacceptably high risks of poverty and social exclusion (Koh, 2018[15]). In the context of new technologies rapidly permeating the world of work and population ageing, policies to tackle labour market duality are an integral component of a comprehensive strategy to make Korean economic growth more inclusive.

The clearest manifestation of labour market dualism in Korea is non-regular workers, who account for about one-third of all employees and whose pay and other terms of employment are considerably less attractive than those of regular workers (Table 2.1). Based on the definition adopted by the Economic and Social Development Commission (formerly the Tripartite Commission) in 2002, non-regular work takes a number of different forms, involving one or more of the following characteristics:

  • Temporary or contingent workers who accounted for 64% of non-regular employment in 2019 and the large majority of which have fixed-term contracts;

  • Parttime- workers who account for 42% of non-regular employment in 2019;5

  • Atypical workers who have a number of different employment statuses (e.g. independent contractors, dispatched workers, daily and oncall- workers) and accounted for 28% of non-regular employment in 2019.

The share of employees who are non-regular workers rose sharply in the years following the 1997 economic crisis, reaching a peak of 37% in 2004. Since then it has declined modestly to 33% in 2016 but rebounded to 36% in 2019. Temporary forms of employment have accounted for most of the overall evolution in non-regular employment, suggesting that one of the main reasons for the secular increase has been employers’ demand for greater flexibility in adjusting the size and composition of their workforces. The modest decline in temporary forms of employment since the second half of the 2000s may reflect regulatory changes intended to discourage overuse of these types of jobs by employers.6

Hourly wages of non-regular workers are far lower than those of regular workers. On average, the hourly wage penalty for non-regular workers peaked at close to 38% in 2010, but has significantly decreased to 31% in 2019, likely reflecting the increases in the minimum wage in 2018 and 2019 (Table 2.1, panel B). While all types of non-regular employment pay less well than regular employment, the penalty varies, with daily workers or those exposed to seasonal factors receiving a particularly low hourly wage. Non-regular workers are also much less likely than regular workers to receive other forms of compensation such as bonuses and allowances.

Beginning with Ahn (2006[16]), a number of researchers have argued that a significant part of the overall wage gap in Korea for non-regular workers can be attributed to differences in the quality of the employee. However, a considerable share of the total pay difference remains even after taking into account individual characteristics such as education and work experience, confirming that non-regular workers are subject to discriminatory treatment (Shin, 2009[17]; Kim, 2006[18]). Jones and Fukawa (2016[19]) show that lower wages result in lower income in households headed by a non-regular worker.

Certain workforce groups are particularly likely to hold non-regular jobs, while other groups have a low incidence of non-regular work (Table 2.2). Older workers, for example, are strongly over-represented among non-regular workers. The share of non-regular workers who are 60 or older is more than four times as high as the corresponding share for regular workers (26% versus 5.9%). This reflects a common pattern of regular workers retiring at relatively young ages from their career jobs and later commencing “second careers” in non-regular jobs. Workers under age 30 are also somewhat over-represented among non-regular workers in Korea, although youth account for an even larger share of temporary workers in many European countries. Korean women are more likely than men to hold non-regular jobs, as is also the case in most other OECD countries. Another common pattern that is also present in Korea is that the least-educated workers have the highest incidence of non-regular employment.

The prevalence of non-regular employment varies across occupations, sectors and firm size. Assembly, machine operators and elementary workers, along with service workers, have an above-average incidence of non-regular employment, while the opposite is true of administrators and managers. Non-regular employment is relatively rare in manufacturing, while it is common in the construction sector as well as a number of key services such as wholesale, hotel and restaurants.

Unsurprisingly, non-regular jobs are much less stable than standard jobs. The average job tenure for non-regular workers is only about one-third that for regular workers (two years and seven months versus seven years and nine months). Short tenure discourages employee training, thus slowing the accumulation of human capital and productivity growth (Ban et al., 2018[20]).

Employees cite varying reasons for accepting non-regular employment. Some workers even declare that they benefit from certain characteristics of nonregular jobs, particularly greater -workinghours- flexibility and lower stress associated with some of these jobs (Table 2.3). For example, parttime- working arrangements can help to balance work with other activities, such as family responsibilities. However, nearly half of all part-time workers (49%) say that they have to accept a non-regular employment because they lack alternatives. The share of atypical workers who feel they must accept a non-regular contract on an involuntary basis is higher and reaches nearly 60%.

Importantly, the high level of labour market dualism in Korea also reflects the relative underdevelopment of the service sector and of small and medium-sized enterprises (SMEs), which are far less productive than large manufacturing firms. Since non-regular work is more prevalent in smaller and service-sector firms than in large manufacturing firms (Table 2.2), there is considerable overlap between the labour market segmentation associated with non-regular work and that associated with the underdevelopment of SMEs and service sector firms. Figure 2.6 illustrates this point by showing how firm size and employment type interact to influence pay levels:

  • Average wage levels rise sharply with firm size for both regular workers and non-regular workers, with the firm size effect being somewhat stronger for non-regular workers.

  • Non-regular workers on average earn less than regular workers within the same size class.

  • Non-regular workers in the largest firms, employing 300 or more workers, earn on average more than regular workers in firms employing fewer than 300 workers (81% of the average regular worker wage in the largest firms, versus 69%).

The large differences in pay and other employment conditions across different types of firms have important implications for policies to reduce dualism. Most obviously, they mean that the labour market policy measures need to be supplemented by other measures to promote productivity improvements in the service sector and SMEs. Reviving productivity growth is the issue topic of Chapter 3 of this report.

Another implication is that a large share of the earnings inequality associated with duality cannot be redressed by antidiscrimination laws that prevent employers from discriminating unfairly in setting pay levels for different groups in their workforce. These regulations are very important for improving the relative employment conditions of non-regular workers in large firms, as for equity reasons in the labour market more generally. However, antidiscrimination regulations cannot be expected to address the large share of overall earnings inequality that is attributable to low earnings in SMEs.

The broad challenge of reducing labour market duality in Korea in the long-term requires a multi-pronged approach, including the need to address lagging productivity in the service sector and SMEs (Chapter 3). With regard to the specific role that labour market policies can play, the key objective of the reform initiatives undertaken by Korea since the end of the 1990s has been the achievement of a stronger degree of harmonisation between the regulatory regimes governing three types of non-regular employment: workers hired under a fixed-term contract, part-time workers and temporary agency workers. The main features of today’s regulatory framework for these three groups of non-regular workers are discussed below.

Despite the 2007 reform that limits fixed-term contracts to two years (with some exceptions) to encourage conversion to regular worker status over the recent past (2016-18), around six out of ten employees on fixed-term contracts who had worked at least 18 months left their firm when their contract expired according to the Survey on the Status of Fixed-Term Workers in Establishments. The proportion was 69% at firms with more than 300 employees. Meanwhile, only less than one-third of workers were converted to regular status. The government has proposed to extend the limit on fixed-term contracts to four years for employees above age 35 to reduce the risk of layoffs upon reaching the second year limit.

Many countries have attempted to limit the use of fixed-term contracts by placing restrictions on when and for how long firms can use them:

  • In Japan, following the Action Plan for the Realization of Work Style Reform adopted in March 2017, the government amended the law to entitle fixed-term workers (including fixed-term workers as well as part-time and dispatched workers) to equal treatment with regular workers that have the same duties and same “scope of shift in duties and personnel positioning” (including opportunities for advancement/promotion).

  • Germany’s 2018 Coalition Deal included an agreement to limit the number of fixed-term contracts concluded without an objective reason per firm, and to reduce the maximum duration from 24 to 18 months (if an objective reason is provided, the maximum is five years).

  • The Decreto Dignità (Dignity Decree) in Italy, issued in July 2018, introduced a rule that after 12 months it is only possible to renew the fixed-term contract if the firm provides specific justification. At the same time, the maximum overall duration of successive fixed-term contracts has been reduced to 24 months (from 36) and the maximum number of renewals has been reduced from five to four.

  • Recent legal decisions by the Swiss Federal Supreme Court (in 2017) and the Swiss Federal Administrative Court (in 2016) have made it more difficult for firms to use multiple extensions of fixed-term contracts to avoid dismissal protection clauses.

  • In 2018, the Portuguese government negotiated new measures with social partners in the aim of decreasing excessive use of non-permanent contracts and increasing protection for fixed-term workers.

  • The new Labour Code that came into force in Lithuania in July 2017 introduces changes to the regulations on fixed-term contracts, among which doubling the rate of unemployment insurance contributions for fixed-term contracts compared to open-ended contracts and imposing a minimum notice period for work relationships of more than a year and providing for severance pay where the relationships extend over two years.

The 2007 reform also outlawed “unreasonable discrimination”, in terms of wages and working conditions, against non-regular workers who perform tasks similar to regular workers in the same firm. However, given that workers may feel hesitant to file complaints, reflecting their worries about a negative reaction from management. The law was revised in 2012 to require labour inspectors to encourage firms to correct any discrimination, even in the absence of complaints. It was revised again in 2014 to make the system more effective by awarding punitive damages. However, only 3 495 discrimination cases were filed over the 2007-18 period. In 2017, 12 000 workplaces were inspected and 585 were found to have discriminatory practices (Ministry of Employment and Labour, 2017[21]). Within EU member states, EU Directive 99/70/EC establishes some general principles and minimum requirements aimed at balancing flexibility in working time and security for workers. The directive applies a principle of non-discrimination, requiring that fixed-term workers be treated in a manner no less favourable than comparable permanent workers are. It also requires member states to take measures to prevent abuse, which can include requiring objective reasons for renewal of a fixed-term contract, imposing a maximum overall duration or imposing a maximum number of renewals. In implementing the EU directive, EU member states have had the freedom to choose which exact measures to take, with the result that there are significant variations across EU countries in regulations for fixed-term contracts (OECD, 2019[22]). In addition, some countries (e.g. Ireland, Spain and Greece) are targeting inspection efforts in particular sectors or geographical areas known to have a greater prevalence of false self-employment.

OECD (2018[23]; 2016[24]; OECD, 2013[25]) has analysed the strong policy emphasis on protecting jobs in the Korean institutional setting stressing that it has failed to deliver employment stability and income security for a large share of the labour force. The broad recommendation resulting from this work is that breaking down dualism requires a comprehensive strategy that should encompass relaxing employment protection for regular workers and making it more transparent while increasing social insurance coverage and training for non-regular workers. Hiring a non-regular worker cuts a firm’s social contributions by 8-9% compared to a regular worker covered by the three major social insurance programmes.

Regular workers receive high protection in Korea, particularly in large firms, as a result of labour laws, court decisions, business practices, social customs and labour unions (Korea Development Institute, 2010[12]). Dismissals for economic reasons are heavily regulated, with many procedural hurdles for firms: consultations with workers, implementation of measures to avoid or minimise layoffs, and strict selection criteria for employees to be dismissed (Lee, 2015[26]). In addition, there must be “urgent managerial reasons”, a criterion that is not well-defined and difficult to prove in court. Courts take into account the company’s financial situation, market conditions and competitiveness. Therefore, layoff costs of regular workers, which are difficult to predict, can be very high due to long and complex court rulings, thus increasing the incentives to hire non-regular workers who can be easily dismissed after the termination of contract (OECD, 2016[24]).

Reforms that make employment protection more predictable have long been known to support the efficient allocation of workers contributing in turn to higher productivity (Cournède et al., 2016[27]; OECD, 2018[28]). Many OECD countries apply legal limits on the level of compensation that can be granted by judges in case of unfair dismissals (Carcillo et al., 2019[29]). For example, several countries impose restrictions on the level of compensation in the case of unfair dismissal and have also ratified ILO Convention no. 158 and the European Social Charter on termination of employment (France, Spain, Portugal, Finland, and Sweden). There are also countries that have implemented binding compensation schedules and have ratified the European Social Charter, but not ILO Convention 158 (Italy, Belgium, Denmark, Netherlands, and the UK). Finally there are countries that make use of an indicative schedule (Germany).

The shift from protecting jobs to protecting individuals requires strengthening the social safety net. A recent OECD report, Connecting People with Jobs, Towards Better Social and Employment Security in Korea (OECD, 2018[30]), has reviewed the many incremental welfare reforms introduced, especially in the past decade, to reach workers and jobseekers. Important reforms include the possibility for self-employed people to opt into Employment Insurance; an effort to customise Basic Livelihood Security Programme payments to claimants’ needs; the introduction and expansion of the Employment Success Package Programme, which provides targeted employment support and training as well as some income support to people not entitled to other benefits; and the introduction of an Earned Income Tax Credit to benefit the working poor with a recent expansion to self-employed people. These were important steps although the share of low-income jobseekers and low-wage workers not covered or supported by any measure remains high, for example:

  • Employment insurance: Only about one-third of the unemployed receive benefits. In 2018, among those entitled to employment insurance 70.8% were covered, which is equivalent to 43.6% of all non-regular workers. The lower coverage of non-regular workers is problematic, given their precarious jobs;

  • The earned income tax credit: Coverage is limited to around 8% of households, in part due to eligibility criteria, and spending was 0.3% of GDP in 2018.

  • Basic Livelihood Security Programme: This programme, the primary public assistance policy, targets the extremely poor. The maximum livelihood benefit support is equivalent to 30% of the median income in 2018, while coverage is limited to around 3% of the population by strict eligibility criteria.

Accordingly, Connecting People with Jobs (OECD, 2018[30]) recommends that Korea continue and accelerate the reforms of its labour market and social protection institutions to expand the reach of its social and employment support. Building upon recent changes, future reforms should strengthen the enforcement of existing legislation, further expand existing measures, and take new measures as necessary. However, these efforts should also ensure in all cases that strong activation and positive employment outcomes remain a key focus. These include specific measures intended to: boost Employment Insurance coverage, while also better enforce rules; maximise the impact of the effective Employment Success Package Programme by increasing the number of participants and improving the quality of services; ease access to the Basic Livelihood Security Programme; and boost support for the working poor through the Earned Income Tax Credit, in harmony with other measures, including the minimum wage.

Action has recently been taken to raise the minimum wage as part of the “income-led growth” that the government aims to achieve. The minimum wage is set each year by the Minimum Wage Council composed of representatives of workers, employers and the public interest. Korea raised its minimum wage from 29% of the median wage in 2000 to 63% in 2019 (Figure 2.7) above the OECD average of 52%. The hourly minimum wage was increased by 16.4% and by 10.9% in 2018 and 2019 respectively. As a result, the increase by 12 percentage points of the minimum wage relative to the median wage since 2016 was spectacular in comparison with the increase observed for the average of OECD countries (less than 2%, Figure 2.7). Following a recent decision made by the Council, in 2020, the minimum wage will increase at a slower pace (2.9%). New criteria for the assessment of the compliance with the statutory minimum were introduced at the end of 2018, which required a revision of the Minimum Wage Act (see Box 2.1). The Minimum Wage Council estimates that 18% of workers were influenced by the minimum wage hike in 2018, of which about 80% were low-paid youth, women and elderly workers (Ministry of Employment and Labour, 2018[31]). The increase in the minimum wage is aimed at addressing worsening income inequality and guaranteeing a decent living for low-income workers. This goes along with the increase of the Earned Income Tax Credit and Child Tax Credit, which more than doubled in terms of target population and expenditure in 2019.

There is concern that the combined effects of the hike in the minimum wage and the revised Minimum Wage Act will be detrimental to low-productive and financially unstable SMEs, where vulnerable workers are highly concentrated. In response, the government introduced a “Job Stability Fund” for SMEs in 2018 (still being implemented in 2020). This measure mainly targets firms with less than 30 employees, which can receive monthly KRW 130 000 (USD 107) for each worker whose monthly wage equals less than KRW 2.1 million (USD 1 724). In addition, social insurance contributions are also subsidised (up to 90% of the premium). Furthermore, the policy package contains measures to reduce credit card commissions and tax credits for small businesses and self-employed (Ministry of Employment and Labour, 2018[33]).

According to a recent study by the Korea Development Institute (Choi, 2018[34]), the government’s measure is cushioning the employment effects of the minimum wage hike in 2018. The study finds that although employment growth in the first quarter of 2018 was smaller than the same period 2017, in part this may reflect industrial restructuring and slowing population growth. Analysis from the Korea Labour Institute, using a dynamic model (Hong, 2018[35]), shows that the minimum wage hike in 2018 did not have significant impact on employment until March 2018. However, working hours decreased significantly in January and began to recover afterwards.

The OECD Jobs Strategy (OECD, 2018[28]) emphasises that accurate and impartial advice and the views of social partners are particularly important to monitor the impact of regulatory changes and give objective recommendations, based on a wide range of economic and social factors. Independent commissions are particularly well placed to play this role. The operation of these bodies varies from country to country in terms of the advisory (e.g. France) or legally-binding (e.g. Australia) nature of their recommendations, the extent to which the view of the social partners are taken into account and their independence (see Box 2.2).

International experience suggests that one way to minimise possible side effects of the minimum wage on employment is to apply different rates across regions, economic activities or workforce groups to reflect differences in economic conditions and productivity. While in most countries, minimum wages are set at the national level, in Canada, Japan, Mexico, the United States and several emerging economies, they are set at sub-national level, while in Costa Rica, Japan and Mexico rates differ by sector or occupation. Around half of OECD countries with a statutory minimum set lower rates for youth. Lower rates are also set in some cases for workers hired under training/apprenticeship contracts, as well as for the long-term unemployed. For more detail see (OECD, 2015[36]).

Collective bargaining and social dialogue can further help governments promote a broad sharing of productivity gains, provided that coverage is high. On average across OECD countries, the number of workers covered by collective bargaining decreased from 45% in 1985 to 32% in 2016 (Figure 2.8). Collective bargaining coverage is around 12% in Korea, the second lowest level in the OECD. Collective bargaining coverage tends to be highest in manufacturing and construction as well as in larger firms.

According to the OECD Job Strategy (OECD, 2018[28]), the main challenge for social partners and governments is to make collective bargaining work better in terms of employment, job quality and inclusiveness, while avoiding that it becomes a straitjacket for firms. The best way of ensuring this is by having well-organised social partners based on broad memberships. This allows social dialogue to be widespread at the firm-level among worker organisations and employers and to be based on representative social partners at higher levels (e.g. sector, country). Governments, including possibly Korea, should therefore promote social dialogue in large and small firms alike and allow labour relations to adapt to emerging challenges, including in connection to non-standard forms of work.

Regarding the challenge in connection to non-standard workers more specifically, it is worth noting that Korea is already giving considerable thought to the status of dependent contractors, who are mentioned a few times in the response provided by the Korean authorities for the recent OECD survey of Policy Responses to New Forms of Work (OECD, 2019[22]) in relation to ongoing policy discussion/development (e.g. discussions around expanding employment insurance, a taskforce said to be working on this topic). This probably reflects the substantial attention paid to measure and track the number of non-regular workers. Additionally, Korea is noted by the ILO as an example of a country that measures the prevalence of dependent contractors, although defined as a subset of employees (ILO, 2018[37]). From the questionnaire for the survey of Policy Responses to New Forms of Work, it appears that Korea has been doing this since 2002, which suggests that the country has had its eye on the issue for quite some time.

Some OECD countries have made tailored extensions of collective bargaining rights to some non-standard workers. In Sweden and Canada, for example, dependent self-employed workers have had the right to bargain collectively since the mid-1900s (OECD, 2019[22]). In both cases, there is some evidence that the application of the dependent self-employment status is relatively limited today, potentially because such workers have obtained employee rights in other ways. There has been discussion in Canada about extending employment rights to certain contractors whose status lies in between employee and independent contractor.

Employers’ organisations are being put to the test by the emergence of new forms of business. This is particularly the case following the rise of digital platforms, which has brought the issue of classification to the forefront. In the United Kingdom, for instance, the union GMB represents private hire drivers and took the case of Uber drivers to an Employment Tribunal. The court reclassified self-employed Uber drivers into workers covered by minimum wage legislation, and granted them legal provisions for holiday pay and breaks. Tribunals in Italy, France and the Netherlands recently took similar decisions. Moreover, even before these recent rulings, the risk of re-classification had led platforms in France and Italy to accept to open discussions or negotiations with recognised unions or workers.

In Korea, established trade unions are developing strategies to reach non-standard workers. This is done through lobbying for public policy interventions restricting the use of non-standard forms of employment or enhancing the quality of these jobs at either national or local level. For instance, trade unions and civil society organisations created the “Alliance for Nonstandard Workers” in 2000, which in 2006 succeeded in pushing the Government to limit the use of fixed-term contracts and outlaw discrimination based on employment status (Fleckenstein and Lee, 2018[38]). The Korean Confederation of Trade Unions has also changed bargaining practices to ensure better outcomes for non-standard workers. For instance, it launched its “solidarity wage” initiative in 2013, which promoted lump-sum pay increases rather than percentage increases with the explicit aim of “closing the wage gap between standard and nonstandard workers” (Durazzi, Fleckenstein and Lee, 2018[39]).

Social protection systems play a key stabilising role in the current context of heightened uncertainties about the pace and extent of labour market changes. But accessing social protection can be especially difficult for workers in less secure forms of employment. More volatile career patterns or a growing diversity of employment forms pose potential challenges for support provisions that link benefit entitlements to past or present employment. In Portugal, changes in 2012 and 2018 have gradually extended unemployment protection to the economically dependent self-employed, in cases where there was termination of professional activity. In Spain, the trabajador autónomo económicamente dependiente (economically dependent self-employed, or “TRADE”) category has enhanced access not just to social protection (health and accident insurance, pensions and unemployment benefits), but also to a wide range of rights and protections, including the right to breaks and work/life balance, non-discrimination, and the right to be collectively represented through the Independent Work Council (Consejo del Trabajo Autónomo). Italy’s collaboratori category was created with the purpose of improving access to social protection for those in between independent contractor and employee status. Unemployment benefits for collaboratori were established in 2017, along with new protections (for both collaboratori and freelance professionals) in case of maternity, illness or accident, including the possibility to postpone/suspend or find a suitable replacement for an activity for a client, subject to agreement with them. As a step in the right direction, the Korean government plans to allow workers who fall into the grey area between the employed and the self-employed to enrol in employment insurance, specifically those directed and supervised by and strongly dependent on their employers. The government has also been considering setting up an employment insurance scheme for “artists”, which is one such dependent worker group.

In a rapidly changing world of work, skill demands have been gradually, but consistently, shifting towards a more intensive use of cognitive and interpersonal skills under the combined forces of technology and globalisation. Accordingly, many OECD countries face a need to scale up and strengthen training opportunities for adults to keep their skills up to date or acquire new ones over longer working lives. Low-skilled adults are likely to bear the brunt of changes in skill needs unless they can engage in high-quality reskilling and upskilling programmes. Similarly, as new forms of work emerge at the intersection between self-employment and employee status, it is important to ensure that this does not translate into growing inequality in access to training based on employment status.

Longitudinal data, which follow the same workers over time, put these considerations in the Korean context. Specifically, Table 2.4 provides an overview of mobility from non-regular to regular work for different groups of Korean workers. The share of all non-regular workers in one year who have moved into regular jobs the following year is about 18%, based on the most recent figures available (2011-17), suggesting a low mobility for non-regular workers. Although the corresponding three-year transition probability is higher than the one-year rate, it nevertheless concerns less than one-fourth of all non-regular workers (23%), suggesting that most non-regular workers remain trapped in poor jobs. At the same time, one key piece of evidence is that the mobility into regular jobs (both one- and three-year) appears to be lower for low skilled workers than it is for medium and high skilled workers. Furthermore, mobility tends to decrease with the age of workers.

Over the past decade, Korea’s labour market, mirroring a pattern in most OECD countries, has experienced a significant change in occupational structure (OECD, 2019[1]). Figure 2.9 shows that one of the most evident transformations concerns the increased polarisation of employment into high-skill jobs, on the one hand, and low-skill jobs on the other, with a hollowing out of middle-skill jobs (Autor, Katz and Kearney, 2006[40]; Goos and Manning, 2007[41]; Goos, Manning and Salomons, 2009[42]; OECD, 2017[43]). Much like almost all countries for which data are available, in Korea the process has resulted in an overall shift of employment towards high-skilled occupations.

The relative importance of technological progress and globalisation in driving job polarisation is the subject of lively debate. Recent OECD work to identify the drivers of job polarisation suggests that the penetration of Information and Communication Technology (ICT) in a given industry bears the strongest correlation with its polarisation (OECD, 2017[43]; Breemersch, Damijan and Konings, 2017[45]). ICT is seen as complementing high-skill workers who perform the types of complex cognitive tasks typically found in managerial and professional occupations. On the other hand, middleskill clerical and production jobs are typically characterised by “routine” tasks that can be executed following a precise set of instructions and are therefore more prone to automation. Low-skill jobs (such as those in catering, cleaning, and other services) tend to involve non-routine manual tasks that require more manual dexterity and hand-eye coordination, and have so far proven more difficult to automate on a large scale. This -socalled- routine biased technological change, therefore, results in lower demand for middle-skill jobs relative to both high-skill and low-skill jobs, giving rise to the polarisation of occupation structures in advanced countries (OECD, 2017[43]).

The OECD Survey of Adult Skills (PIAAC) assesses the readiness of adults to cope with ongoing technological transformations. Specifically, Figure 2.10 provides an international comparison of proficiency levels in using digital and communication technology tools to perform practical tasks. Although levels of familiarity with ICT vary widely across countries, Korea stands out as one of the countries with the lowest share of adults with communication and technology application skills.

Intergenerational gaps in ICT skills are also wide in Korea. Labour market entrants and older workers show very different profiles with regard to their abilities to solve problems and find solutions using ICT technologies (Figure 2.11). Approximately 65% of Korean youth (16-24) have the digital problem-solving skills needed in today’s labour market, corresponding to one of the highest among the OECD countries (OECD, 2013[46]). This compares with less than 10% among older workers (55-64), which is among the lowest in the OECD. Accordingly, the relatively high share of adults with low ICT proficiency in Korea is mainly ascribable to the older generations.

The low skill level of older workers is often identified as one of the factors holding back productivity in services and SMEs, given that once workers leave their careers at a relatively young age (around 50 years old, see section below on older workers), a large share ends up working in SMEs or in self-employment in the service sector. Indeed, 28% of those employed in 2011 were self-employed, one of the highest rates in the OECD and well above the average of 16% (OECD, 2018[23]).

Effective adult learning can help prevent skills depreciation and facilitate transitions from declining jobs and sectors to industries that are growing fast (OECD, 2019[1]). A phenomenon common to all OECD countries is that the level of training participation is lowest for those who in principle need training most, including low-skilled and older adults (Figure 2.12). For the average of the OECD countries, adults with a high level of skills are 40% more likely than low-skilled adults to actually participate in training, although the gap varies significantly across OECD countries. Low-skilled workers are also less willing to participate in training, by around 17% than the highly skilled. For Korea the size of both gaps between low-skilled and the high-skilled workers is one of the biggest in OECD countries.

In a changing world of work, maintaining the employability of workers throughout their working lives is essential to ensure that they can stay longer in their main jobs and are not left behind during transition periods. From a longer-term perspective, building an effective system of lifelong learning is critical to ensure that workers can use and upgrade their core competencies and skills. The low participation rate in education and learning of adults with the lowest skill levels and whose jobs are at particularly high risks of automation suggests that Korea could reap significant gains by expanding such opportunities (OECD, 2019[1]).

The National Human Resources Development Consortium (the CHAMP programme, introduced in 2001) provides financial incentives for large companies, business associations and universities to set up consortia for sharing know-how, equipment and training facilities with SMEs. In 2014, 180 organisations were operating a training consortium under the CHAMP programme, which benefited more than 200 000 SME employees and accounted for 25% of total government expenditure on VET for incumbent workers. One important strength of the CHAMP programme is the provision of training that is relevant to the labour market, with a clear focus on practical and relevant work problems, since in essence this programme is based on a win-win strategy between training providers – most often a large firm – and beneficiaries (OECD, 2020[47]).

According to the recent OECD report Working Better with Age: Korea (OECD, 2018[48]), steps could be taken to further extend the CHAMP programme through specific measures, in close collaboration with the PES or Job Hope Centres for middle-aged and elderly people. For instance, the CHAMP programme could be backed by support and assistance measures for SMEs to recruit a replacement worker for an employee in training, including public subsidies for hiring an unemployed person.

Another key policy challenge to promoting the employability of workers throughout their working life is to develop effective tools for measuring and recognising skills and competencies that workers acquire throughout their careers. For too long, the national qualification system has remained excessively focused on technical skills, which over time has undermined its function as a screening mechanism for employers and as a policy tool that public authorities can use to evaluate skill developments and anticipate skill needs. The development of new National Competency Standards (NCS) is an important step forward. They will enable Korea to address these concerns by providing a better picture of the skills and abilities required for various jobs and occupations at the industry level. The main objective is to ensure all initiatives reflect the skills currently used or needed in the labour market. For example, there is encouraging evidence that the national technical qualification system’s role as a signalling device has strengthened since it was reformed based on the NCS. Furthermore, the adoption of a Course Based Qualification in 2015 has encouraged training institutes to provide training in skills required in the workplace and people to acquire qualifications in such skills. More could be done to mobilise all relevant stakeholders, including training providers, employers’ organisations and trade unions, who will ultimately be responsible for the successful implementation of the NCS (OECD, 2020[49]).

Time-related constraints are a major obstacle to training participation in Korea, for all age groups (OECD, 2020[47]). For example, being too busy at work is the most prevalent reason reported by workers to explain why they did not participate in any VET programmes although they would have wanted to do so. This reason represents almost 46% of all answers of Korean adults (age 25-64), the highest proportion among the OECD countries for which information is available and nearly twice the OECD average (OECD, 2018[48]).

In an attempt to stop chronic overwork, Korea has introduced new measures to lower the maximum hours people can work from 68 to 52 hours – split between 40 statutory work hours and 12 hours of allowed overtime. The new rules are being enforced gradually. Already in force since July 2018 in large firms and since January 2020 in medium-sized firms, the government plans to extend them to small firms from July 2021. A number of accompanying support measures are introduced to limit the impact of the reduction on the monthly wages of low-waged workers, who are paid hourly, and the emergence of possible labour shortages. Among the latter, flexible working hours arrangement and Smart Factory Manpower initiatives are foreseen, aiming to provide training to 60 000 SME workers.

A number of OECD countries are taking action to implement systems of lifelong learning that deal with increasingly non-linear career paths and support individuals as they move between jobs, careers, training and other absences from the labour market throughout their lives (e.g. France, Portugal and Spain). One important element of this is portability of training rights and the portability of skills themselves. Individual learning accounts (ILAs) are schemes that provide individuals with resources they can use to take up further training on their own initiative. One feature of such an approach is that they link training rights to individuals rather than to specific jobs, with the intention that they be used throughout individuals’ entire careers. Depending on the set-up of the ILA, they may also be used to expand access to public funding for training to a wider group of individuals, particularly the low skilled. The French Individualised Learning Account (Compte Personnel de Formation – CPF), set up in January 2015, provides an interesting example of such an initiative. As of January 2018, the CPF covers the selfemployed-. It now allows any active person, from first entry into the labour market until retirement, to acquire training rights that can be used throughout their professional life. Importantly, training rights are maintained across different forms of employment, through periods of non-employment (such as unemployment, parental leave or long absence due to illness) and are transferrable between employers. In Korea, financial support has been provided using a voucher system7, taking the form of a “Learning for Tomorrow Card” to encourage up-skilling of vulnerable groups and encompassing workers in SMEs, non-regular workers and jobseekers. From 2020, this scheme, now renamed “People’s Learning for Tomorrow Card”, covers the dependent self-employed, offering KRW 3 to 5 million (USD 2 400 to 4 000) to cover training costs for 5 years.

As discussed above, labour market reforms to improve conditions for non-regular workers and the move towards learning systems that are future-ready for all are essential to promote social cohesion. In addition, the specific challenges and pressures faced by under-represented groups require tailored policy actions. This is particularly the case for women, youth, older workers and migrants. This section takes a closer look at these groups. Beyond direct employment effects, addressing uncertainties about the future of under-represented groups can have important implications for social integration, childcare and elderly care responsibilities, fertility, marriage and family formation.

Improving employment and career opportunities for Korean women is a key focus of the OECD’s Rejuvenating Korea: Policies for a Changing Society (OECD, 2020[47]). Although women’s employment rate is increasing, the report stresses that women are particularly affected by the duality of the Korean labour market. It is difficult to obtain a regular employment contract in occupations and industries that support career progression and the fulfilment of individual labour market aspirations. Those who attain such employment have little time to devote to family life, implying that women in regular employment often postpone parenthood, sometimes indefinitely. At the same time, rather than being employed as non-regular workers with potentially unsatisfactory employment conditions and career prospects, many highly educated women choose to stay at home and care for their families if their household income is sufficient.

Compared to the OECD average, women tend to leave the labour force following childbirth at very high rates in Korea. Figure 2.13 shows that the female employment rates dip around childbearing years. Women who do go back to work often settle for jobs with low pay and poor career prospects. According to KLIPS data, women who interrupted labour force participation after the birth of their first child stopped working for an average of three years over the period 2006 to 2015. However, these figures are down from historical numbers: over the period 1996-2005, new mothers left the labour force for on average of almost six years.

Moreover, women are substantially more likely than men to be in non-regular employment, whether on a temporary or part-time basis (41% compared to 26% as of 2017). Men are unlikely to withdraw from the labour force for family reasons. Women who have left the labour force for a few years to care for young children find the return to labour market an unattractive proposition. In general, regular employment opportunities are hard to find for “mother returners” to whom often only low paid non-regular job opportunities are available. As a result, mothers are three times more likely to be in non-regular employment than fathers (Figure 2.14).

Although part-time work is on the rise in Korea, its incidence among women (and men) is significantly lower than on average across OECD countries. 18% of employed women in Korea worked part-time (less than 30 hours per week) in 2018, compared to an average of just over 25% in the OECD.

Part-time jobs are often low-paid with limited social protection. Until recently, a person working for less than 60 hours per month or less than 15 hours per week was not entitled to unemployment benefits. Since July 2018, however, employees with a contract of three months or more are eligible. The right to parental leave is not formally guaranteed to individuals working less than 60 hours per month.

Most OECD countries have long provided paid maternal leave. With the exception of the United States, all OECD countries offer mothers a statutory right to paid maternity leave around birth, on average between 15 to 20 weeks. In Korea, women are entitled to 90 days of maternity leave. The first 60 days are paid up to 100% of past earnings, and the remaining 30 days at 100% of earnings up to a ceiling of KRW 2 million (USD 1 622) as of 2020.

An increasing number of countries also offer paid paternity leave – short but usually well-paid periods of leave to be used by fathers within the first few months of birth. Paternity leaves are often one or two weeks, although in some OECD countries (e.g. Greece and Italy) they are only a few days.

In addition, many countries have paid parental leave arrangements that provide for paid leave periods for about one year across the OECD on average. Often the paid leave entitlement is “shareable” among parents, which frequently leads to mothers rather than fathers using the leave if only to limit the loss of household income during leave. For that reason, countries have introduced specific father’s entitlements within parental leave systems that are not transferable, or award bonus months if fathers use the leave. In terms of duration, Japanese and Korean paid parental leave systems are the most generous as they provide one year of non-transferable leave for fathers.

Despite the lengthy entitlements offered to parents, Korea’s paid leave programmes are generally not well used. For example, only about 24% of mothers who gave birth in 2019 received maternity leave benefits from the national employment insurance fund (Statistics Korea, 2019[51]). In 2019, around 105 000 parents (of which only 21% were fathers) claimed the parental leave benefit – roughly just over 30 claimants per 100 live births (Statistics Korea, 2019[51]). This compares poorly to some other OECD countries. For example, in Germany in 2016, roughly 94 mothers and 35 fathers claimed parental leave benefits for every 100 live births. Portugal has made the use of parental leave by fathers mandatory: Portuguese fathers are entitled to paid parental leave of 25 working days, of which they are obliged to use 15 days within the first month after birth.

A recent OECD report, Rejuvenating Korea: Policies for a Changing Society (OECD, 2019[50]), identifies different reasons for the limited use of parental leave entitlements, including:

  • Prior to July 2019, one-third of female employees were not covered by the employment insurance (EI) fund, which excluded employees working for less than 60 hours per month, domestic workers and workers in SMEs in the agriculture, construction, forestry, fishery, and hunting sectors with four or less employees. Reform since July 2019 covers these workers with income support up to KRW 1.5 million (USD 1 364) for three months. Government officials and public and private school teachers are covered by separate occupational arrangements that pay at the same rate as the EI but also provide for two years of unpaid leave.

  • Relatively tight criteria for eligibility for employment-protected leave: until reform in 2018, employees had to have worked for an employer for the preceding 12 months, which meant that many workers, especially non-regular workers, did not qualify. Reform in 2018 reduced the qualifying period to six months, which is likely to increase future uptake.

  • To take paid parental leave, Korean employees must have been insured for at least 180 days prior and take at least 30 days consecutively – which is likely to reduce uptake among fathers. Self-employed workers cannot access paid parental leave.

  • Overall, leave payment rates are not high by international comparison. While the first three months of leave are paid at 80% of previous earnings – and 100% of previous earnings for the second parent to take leave – the remainder is paid at just 50%.

Rejuvenating Korea (OECD, 2019[50]) acknowledges the rapid development of the Korean Early Childhood Education and Care (ECEC) system, which offers a comprehensive range of services for children under school age. There are three main types of ECEC support: centre-based day-care, kindergarten, and childcare services at home. Support for centre-based day-care services is available to parents of all children aged 0-5, subsidised (all-day) home-based child-care services are available for children aged between 3 months and 3 years old, and support for kindergarten is available to all children aged 3 to 5. Spots in publicly supported facilities are heavily subsidised by the government, and generous cash benefits are available to parents with children in centrebased- day care and kindergarten. As a result, Korea has some of the lowest out-of-pocket childcare costs in the OECD. Parents who do not use any of the three main types of ECEC supports can access a home care allowance that provides financial support to help them care for their children full-time.

Having quickly developed a childcare sector, including with the help of private ECEC providers, policy is increasingly turning to quality issues. The Korean authorities introduced the Nuri curriculum in 2013 with the aim of improving standards, and in June 2019 introduced mandatory accreditation for centrebased- services. The accreditation process considers the care environment, management, childcare programmes, and interaction with children, teaching methods, health, nutrition, and safety.

There is also a drive to bring private centres into the public sphere, as Korean parents often prefer using public centres, as they perceive them to be of higher quality. There is an assessment process before childcare centres can obtain the label “Childcare facility of public standard”, and this process uses more stringent criteria than the mandatory assessments introduced earlier in 2019. As for kindergarten, local education offices (supervised by the Ministry of Education), assess the quality of all kindergartens in their jurisdiction once every three years. As part of a continuous effort to improve the quality of childcare, the government plans to raise the share of children attending public kindergartens to 40% by 2021.

Career differences between men and women develop early in working life and lead to a gender wage gap that is the second highest in OECD countries (Figure 2.14). This discourages women, particularly those with higher education, from returning to the labour force. To address this, several programmes have been put in place to help women return to the labour market.

In 2009, the Ministry of Employment and Labour and the Ministry of Gender Equality introduced education and employment support services in one-stop-shop centres to help mother returners. Saeil (which means newly working) centres provide assistance such as job counselling and guidance on training and vocational education opportunities. The number of centres has more than doubled since 2009, and in 2018, there were 158 centres across Korea. About 480 000 women received employment support services from Saeil centres in 2018, and more than one-third of them found jobs or started their own business in that year (Korean Ministry of Gender Equality and Family, 2019[52]). SMEs who hire mother returners can benefit from a reduction in their corporate tax liability worth about 15-30% of the labour costs of these employees (Act on the restriction of special taxation, 2019[53]).

As discussed below, complementary policies to reform the wage system to emphasise performance and reduce the importance of seniority would also help narrow the gender wage gap.

The prevailing tendency in Korean to spend long hours in the workplace does not facilitate the reconciliation of work and family life. Rejuvenating Korea (OECD, 2019[50]) shows that this imbalance is the main reason for not intending to have a child for about 20% of Korean women. Furthermore, it involves health risks and contributes to low labour productivity overall, so there is ample reason for reform. However, as negotiating employment conditions is the remit of employers and unions, governments around the world are hesitant towards direct intervention in this area.

As discussed above, the Korean government has introduced legislation curtailing working hours to a maximum of 52 per week, and for flexible working practices for parents with young children. However, there is room for improvement, including through:

  • Expanding opportunities to work part-time with remuneration being proportional to that of workers on full-time regular contracts, as is common practice in the Netherlands, for example (OECD, 2019[54]). This could help increase the number of “mother returners”. Also, in line with different cross-national and Korean studies, an expansion of part-time work opportunities (30 hours per week or less) can help increase fertility. Some countries, e.g. Germany and Sweden, reserve flexible working time entitlements for employees with care responsibilities for young children. Other countries, such as the Netherlands or the United Kingdom, have opened this possibility to all employees to avoid discrimination against particular groups or employees.

  • Promoting greater working time flexibility, i.e. encouraging companies to develop opportunities to work with flexible starting and finishing times, spread working hours across weeks or months, or use home or teleworking options to help workers balance work and family. The government could encourage companies to put this issue on the agenda of company level and sectoral bargaining, and facilitate the sharing of information on best practices.

  • Strengthening affirmative measures to promote gender equality in employment. Korea has put in place Affirmative Action plans in 2006 to monitor large companies (initially 1 000 or more employees and extended to firms with 300 or more employees) and public corporations’ progress in this area. Despite the disclosure of the list of the least performing 50 companies since 2014, progress has been slow (27 in 2017, 42 in 2018 and 50 in 2019). As of 2019, across the firms under regular review, around two in five employees were women and women were responsible for only one in five managerial positions, corresponding to an increase of 9% and 11%, respectively, since the implementation of the initiative. Following the example of other countries, e.g. Australia and Iceland, pay transparency measures could be introduced to help reduce gender pay inequalities.

  • Tackling discrimination effectively, with other OECD countries having put in place a combination of measures, namely to: increase sanctions on employers to improve financial incentives to comply with non-discriminatory workplace practices, strengthen the labour inspectorate to more effectively enforce anti-discrimination legislation, and make it easier for workers to file complaints on discrimination with labour courts.

The school environment is extremely competitive in Korea. The country stands out in the international comparison for the many hours children spend studying, which is seen to affect both their well-being and the household cost of education. According to the Private Education Expenditure Survey, in 2018, on average, more than seven out of ten students participated in supplementary education in private institutions in Korea. Families spent KRW 291 000 (USD 241) per month and per child, on average. Almost one in four Korean students study more than 60 hours per week in and outside of school, while on OECD average, only one in ten students study more than 60 hours per week according to PISA 2015 results.

Making child education less stressful and time consuming for children and less costly for their households is a key to improving child and family well-being. This can be expected to generate, in turn, positive and visible effects on fertility rates. Greater public spending on education could increase the number of hours in primary education and thus reduce time in private education. Limiting the opening hours of private academies called hakwon (or learning places)8 to 8 or 9 p.m., while still regarded as late in many OECD countries, would be an improvement on the current situation where they are open until 10 p.m. or midnight.

Care and education policies should focus more on the well-being of children and adolescents from the early years of life, with more attention paid to child development, personal self-esteem, trust and social skills. To this end, ECEC and afterschool services could make more room for play-based learning, sports and arts education, which are shown to have a positive effect on children's cognitive, emotional and social development. This requires qualified staff and establishing partnerships between various groups of practitioners and stakeholders at local level. Guidelines to develop best practices could also help further develop high-quality cost effective family services. Greater investment in and a better organisation of local services as in all-together centres can help improve the delivery of “wraparound care services”, so that children are not left on their own during the day, thus improving child and family well-being.

Virtually all young Koreans complete upper secondary education and more than two-thirds of Koreans aged 25-29 obtain a college or university degree. As a result, Korea has the most educated youth population in the OECD area (Figure 2.15, panel A). Secondary students spend more hours studying than in any other OECD country that participated in the 2015 PISA programme: 51 hours, compared to the 44-hour average (OECD, 2017[55]). While the quality of colleges and universities varies, young Koreans generally leave school with a high level of skills: among the 24 countries or sub-national regions that participated in the Survey of Adult Skills, the skills of 16-24 year olds were only higher in Japan. By contrast, skills of Korean 55-65 year olds were the third lowest in the OECD for this age group. (OECD, 2013[46]).

The large skills gap between younger and older groups attests to the extraordinary increases in educational attainment in Korea over the past half century (Cheon, 2014[57]), although there are signs that this pattern of strong educational expansion may have recently plateaued. Indeed, the share of high school graduates who advanced to college or university reached an all-time high of 82% in 2005, before declining to 71% in 2015 (Figure 2.15, panel B).

Despite the outstanding record of Korea’s long-term education achievements, the employment rate of young Koreans aged 15 to 29, at 42% in 2017, stands well below the OECD average of 53% (Figure 2.16). From a dynamic perspective, the Korean youth employment rate fell by 4 percentage points between 1997 and 2017 a fall largely explained by the decrease in the employment rate of 20-24 year olds (from 58% to 45%). A considerable share of young Koreans are not in education, employment, or training (NEET). In 2017, the NEET rate reached 18.4% in Korea, compared with the 13.2% cross-country OECD average. The share is lower than the 22.1% recorded in Korea in 2000, but represents an increase from the low point of 17.9% in 2014.

Higher education does not necessarily shield a young person from unemployment or inactivity. College and university graduates are more likely to be NEETs than those with lower educational attainments, whereas the opposite applies in most other OECD countries (Figure 2.17, panel A). About 45% of young Koreans who are neither employed nor attending formal education have a tertiary degree (Figure 2.17, panel B). This share is much higher than the OECD cross-country average of around 18%, but somewhat comparable to the share in Japan. The shares of young Korean men and women who are in this situation are on average similar, but higher for men among under-25 year olds and higher for women among over-25 year olds.

One of the reasons for the elevated share of college or university graduates who are NEETs is that they may take breaks to attend informal educational institutions (OECD, 2019[56]). Indeed, while these young people are considered as NEETs in Figure 2.17 (in line with the OECD NEETs definition), they are actually preparing for university or company entrance exams or taking informal education courses, such as language courses. Overall, 4.4% of Korean civilian youth aged 15-29 were enrolled in some form of informal education or exam preparation in 2017 as their primary activity. Excluding these youth would imply a drop in the overall NEET rate from 18.4% to 14.1%, which is on par with the OECD average. Among university graduates, the NEET rate would drop from 25.4% to 22.7%, remaining well above the OECD average. These calculations do not include military personnel, although conscription is one of the factors that increases the age at which young Korean men enter the labour force.

The high dependence of youth on informal education reflects Korea’s strong societal preference for higher education and the eagerness to obtain a job in a large company or the public sector. These forces strengthen the competition among young Koreans to attend a top university. At the same time, given society’s avoidance of vocational education, they push many students to attend sub-par tertiary institutions (Park, 2010[59]) exacerbating the pressure on young Koreans and their families. Furthermore, although informal education may complement formal education, its widespread use indicates a gap between skills supply and demand. Many students think the formal education system does not equip them with the skills they view as prerequisites for success (Jang and Kim, 2004[60]). Employers see formal education degrees as insufficient measures of someone’s skill, preferring their own exams to select their employees.

The above challenges have been the focus of a recent OECD report on Investing in Youth: Korea (2019[56]), which presents new results from a comprehensive analysis of the employment situation of young people in the country. According to the report, awareness of the skills mismatch is high in Korea and the government has launched a number of important initiatives in recent years to reduce the mismatch. These policies include additional public funding for career guidance and counselling in secondary schools, (re)introduction of apprenticeships and Meister high schools (high school customised to industrial demand)9 to strengthen vocational education and training, incentives for tertiary institutions to offer more labour-market relevant degrees and advocacy for competency-based recruitment practices. Although these reforms follow international best practices and have the potential to reduce the gap between skill supply and demand, the report concludes that a number of adjustments remain needed to further boost the expected payoffs.

Career guidance is an important tool to provide information concerning the job market. This helps young people make good choices about their education. According to the Investing in Youth report, better quality training for counsellors and the provision of pedagogical material that includes career-relevant information in all subjects could improve the impact and relevance of guidance in Korean secondary schools. Higher budget allocations for more career services staff would allow schools to provide more individualised guidance. Self-assessment exercises based on benchmark performance measures can serve as a tool for the regular improvement of career counselling.

Adapting counselling to the needs of disadvantaged youth is also essential to raise the effectiveness of career guidance. Students from disadvantaged backgrounds typically receive less counselling and are less able to benefit from it. To address these gaps, schools could consider either programmes that are targeted to this group’s needs or individual counselling sessions for all students in advance of important education transitions.

Finally, Investing in Youth (OECD, 2019[56]) recommends to enhance the involvement of the employer in career counselling. Students tend to be more interested and engaged in career counselling when companies and their employees are directly involved. Schools should better cooperate with employers to offer a mix of different activities, such as information events, workplace visits and job shadowing.

Vocational upper secondary schools traditionally educated a large share of Korea’s workforce. However, their importance declined when higher education expanded rapidly during the 1990s. The Korean government has adopted measures to diversify vocational education options to attract more young people and train workers to better match the needs of employers.

The Meister schools introduced in 2010 aim to follow the German/Austrian model of upper secondary schools that focus on practical vocational training in close collaboration with employers. In addition, apprenticeship programmes combine theoretical education at an upper secondary level with practical training in the company that hires the apprentices. However, only 18.3% of upper secondary students attend a vocational high school and barely 3% attend a Meister school or participate in apprenticeship programmes despite the fact that they are relatively successful at securing employment for their graduates.

Against this backdrop, the Investing in Youth (OECD, 2019[56]) report stresses the importance of disseminating best practices by taking stock of the experience of the most successful Meister schools and the best vocational education and apprenticeship based schools. This could be achieved by creating a template for quality improvements in secondary vocational education. The government could consider increasing the number of these schools, on the one hand, and requiring all vocational schools to create more and deeper connections to industry, on the other hand. Curricula should also be reviewed to reflect National Competency Standards while ensuring sufficiently broad theoretical training.

In addition, apprenticeship programmes could be further expanded. More enterprises and youth could benefit from apprenticeships if they were expanded across a number of dimensions. For instance, longer programmes could prepare apprentices for more complex occupations, while introducing apprenticeship programmes in the service sector could provide employers with a skilled workforce. Enlisting large employers as apprenticeship providers could also boost the prestige of apprenticeships. In turn, this approach could improve the benefits that apprentices and employers of all sizes derive from the apprenticeships.

Finally, reducing the cost of apprenticeships for employers is also important to support access. In some sectors, the cost of offering an apprenticeship exceed its benefits, despite the subsidies offered to SMEs to offset part of the training costs. The negative balance could be reduced or eliminated if employer and employee representatives agree on how training requirements can be redesigned. Employers can also reduce their costs by arranging joint training. Sectoral councils could play a central role in both solutions.

Employer involvement with education, both VET and tertiary education can ensure that curricula are better adapted to labour market needs and that students are better prepared for the labour market. Evidence from European countries suggests that collaborations are more durable when employers are engaged through multiple channels. These can include internship programmes, employer advisory boards, research co-operation and others. Closer collaboration with employers could also help better integrate entrepreneurship-related courses and programmes in education curricula with a view to better equipping students with the skills they need to realise their entrepreneurial ambitions.

Furthermore, partnering with the employer sector could be important to reduce the strong emphasis of hiring practices in Korea on where a person has studied, rather than on abilities and accomplishments. As a result, recent graduates often invest months, and sometimes even years, preparing for company entry exams. Yet evidence suggests that job descriptions that clearly define the required competencies are a better predictor of job performance and reduce job turnover.

The Korean public sector is experimenting with recruiting more of its candidates based on clearly defined job descriptions. Recourse to training on competency-based hiring to employers could encourage private companies to follow similar practices. At the same time, intermediary matching services could be introduced for small and medium-sized firms. Smaller firms often have high hiring costs. Under certain circumstances, information sharing between enterprises and intermediary matching services can help reduce these costs.

At almost 70%, Korea’s employment rate of older workers aged 55-64 is high by international standards – 7 percentage points above the OECD average (Figure 2.18, panel A). According to the recent OECD (2018[48]) report on Working Better with Age: Korea, this reflects the fact that older workers in Korea effectively retire at an average age of 71-73 years – the oldest of any OECD country (Figure 2.19). More specifically, Korean men effectively withdraw from the labour market at an age of 72 years and women do so at 72.2 years. Both of these ages are higher than in any other OECD country – where the majority of workers effectively retire before they reach 65 years of age.

This first glance evidence is reassuring. Indeed, for a country undergoing a rapid trend of population ageing and population decline, high employment rates among older workers can nurture a more sustainable future. While many OECD countries experiencing similar demographic changes are struggling to activate their elderly populations, Korea is already there.

However, it hides an important problem with regard to the low quality of the jobs to which older Koreans have access. Many workers retire early from their main job (most of them before reaching age 55) and find new employment in highly insecure and low-paid jobs or become self-employed. As noted, almost two out of every five workers aged 55-64 in Korea holds a non-permanent job, compared with an OECD average of just one in every ten. Precarious work is even more common among even older workers, with three out of every five of those aged 65-69 in non-permanent positions – roughly three times the OECD average.

For a majority of workers, early retirement from the main job results in lower earnings and potential hardship. Poverty is very high among Korea’s elderly population, despite the fact that such a large proportion of them are economically active. Korea has one of the highest rates of relative income poverty among those aged above 65 among all OECD countries – second only to Estonia (Figure 2.18, panel B). Work is therefore not an effective antidote against poverty for many of Korea’s elderly.

Previous sections have discussed the policies to reduce labour market duality and to provide good opportunities for workers to upgrade their skills throughout their working careers, which can be expected to affect older workers disproportionally. At the same time, Working Better with Age: Korea (OECD, 2018[48]) recommends that policy makers integrate these measures by taking further actions to: i) make work rewarding for older workers; and ii) encourage employers to retain and hire older workers. Taken together these measures can increase the quality of life and work of older workers whilst maintaining their high employment rate.

In Korea, in 2017 just under four in ten individuals aged 65-76 had an income lower than 50% of the national mean – the common threshold used for defining relative income poverty in a population. This was significantly higher than the equivalent share of 12% among OECD countries on average. In large part, this reflects the fact that Korea’s public pension system is not yet fully mature. More broadly, however, it points towards the need for social protection measures to provide increased support for older people.

More could be done to broaden the coverage and increase the value of benefits under Korea’s social assistance scheme, the Basic Livelihood Security Programme (BLSP), while at the same time keeping the focus on the elderly with the lowest incomes. Particularly, Working Better with Age stresses that the benefit level itself remains low by OECD standards and eligibility conditions – i.e., the very strict family support obligation whereby people whose close relatives (children, siblings and parents) would in principle be in a position to provide financial support – disproportionately affect older persons. In an effort to reinforce the support provided by the income security net to the elderly, the government is planning to start to gradually relax the family support obligation in 2020.

Building an employment-friendly and cost-effective pension system is a key requirement for ensuring those entering retirement have an adequate standard of living while those who still want to work may be rewarded in doing so. Korea’s Basic Pension could be better targeted and the payment value increased in order to provide a more solid safety net. This is all the more important as retirement benefits paid under Korea’s National Pension have been significantly reduced to ensure the measure’s financial sustainability.

According to Working Better with Age (OECD, 2018[48]), measures could also be taken to extend both institutional and effective coverage of the National Pension. For many non-regular workers, employers are still not fulfilling the obligation to document their workers formally and pay into the measure. Moreover, employers are required to insure employees only up until the age of 60, although the pensionable age varies from 61 to 65 (and will be 65 for all workers from 2033 onwards). Past age 60, employees can decide themselves whether they want to continue paying into the National Pension. Those deciding to do are effectively obliged to double their contributions to the measure in order to compensate for the absence of employers’ contributions, which puts off many low-wage earners. Many older workers thus work for a decade or more without extending their pension rights. Further measures could also be taken to foster the implementation of retirement pension plans, notably among small and medium-sized enterprises (SMEs).

Human resource management practices in Korea rely predominantly on a seniority-based approach to setting wages and granting promotions. This creates a gap between wage and productivity that nurtures, in turn, a culture of forced early retirement before age 60 through “honorary retirement”. Coupled with insufficient investment in skills development, such practices also largely explain the precarious employment situation of older workers. However, this system does provide workers with the guarantee that they will receive relatively high earnings at a time when they will have to pay for the education of their children, provide financial support to their parents, and make pension contributions for their own retirement. High education costs coupled with weak social protection currently result in strong support among workers and trade unions for maintaining the status quo.

Various measures have been taken recently to prevent employers from setting mandatory retirement at ages lower than 60 years with a view to encouraging employers to re-employ people between the ages of 50 and 60 who are looking for work, also known as the new middle-aged. While this is a big step forward, Working Better with Age (OECD, 2018[48]) stresses that more could be done to address problems. In the short run, it recommends the introduction of a wage-peak system whereby the employer commits to maintaining older workers in their jobs in exchange for a wage cut that is partly compensated by government subsidies granted to the employee. To foster the take-up of such systems, these subsidies could be higher for low-wage earners. The redistributive effect of wage-peak systems needs to be evaluated; fine-tuning measures may be necessary to ensure vulnerable workers can benefit from the system.

The roots of the problem may also include a lack of awareness among key stakeholders regarding the market wage that could be applied for a given job that requires certain specific and/or general skills. In this respect, the progressive revamping of the National Qualifications System, based on the National Competency Standards, could provide an effective tool for recognising and validating the skills workers have acquired throughout their careers.

The Public Employment Service (PES) provides a range of outplacement services and training opportunities to older workers. It mainly focuses on facilitating the matching between jobseekers and job vacancies, with less attention paid to monitoring job-search activities. As in many OECD countries, this matching function relies increasingly on online services, with public portals offering integrated employment services (Work-Net) and guidance for skill development (HRD-Net).

In addition, specialised employment services are offered for vulnerable individuals aged 40 and over. These Job Hope Centres for middle-aged and elderly people provide a wide range of re-employment services tailored to individual needs. Going beyond the matching function, counselling and guidance services are provided to older workers who need (re)training before starting their job search, and often lack the basic ICT skills needed to use online services. In addition, subsidies and counselling services are made available to firms providing outplacement services to their pre-retired employees.

Working Better with Age (OECD, 2018[48]) advocates for steps to reduce spending on direct job-creation programmes in favour of expanding the Employment Success Package Programme (ESPP), which is tailored to individual needs and targets vulnerable groups. Alongside an expansion of ESPP, the income support provided to those ESPP recipients who are not eligible for unemployment or social assistance payments should be increased. Likewise, steps should be taken to strengthen early intervention measures provided to mid-career and older workers by Job Hope Centres in order to help them prepare for their second careers after mandatory early retirement. In particular, these measures could include a comprehensive assessment of skills and work experience plus additional training sessions when necessary and, most importantly, a formal recognition and validation of acquired skills and competencies.

While the new actions to reduce maximum weekly working hours to 52 hours are an important step forward, the government should assess their implementation closely to ensure the expected outcomes are achieved, also in SMEs. Reducing working hours of older workers is challenging since, in practice, older people need to work long hours to make ends meet before their retirement. Adequate income support is therefore critical. Employers would also need to be provided with guidance and consulting services.

Beginning in 2016, the Korean government introduced a new allowance system for older workers aged 50 or above, which subsidises 50% of their reduced income if they work 32 hours or less per week. This allowance could be a significant channel to promote the reduction of working hours and to retain older workers longer in their main job. It may also provide more time for older workers to participate in further training to enhance their productivity. In addition, the government should introduce a system to provide older workers with the right to request a reduction in working hours for health reasons if necessary.

In order to reduce occupational accidents and improve the health of older workers, Working Better with Age (OECD, 2018[48]) recommends ensuring that older workers are aware of the risk factors they face in their job and know how to deal with or avoid those risks. Employers should take into account the physical and mental health conditions of their older employees to ensure the overall work environment, including machinery, working tools, work methods, support from co-workers and supervisors, and working hours, is well adapted to their health conditions.

The combined effect of shrinking youth cohorts and higher educational attainment since the early 2000s has led to a sharp decline in the number of less-than tertiary educated young people, from about 4 million people aged 25-34 in 2000 to 1.4 million in 2015, and this number is expected to shrink below 1 million by 2025. The less-educated workforce also counts many older workers and overall is rapidly aging. At the same time, Korea still has a large number of jobs requiring little education and low skills. The service sector has grown substantially and now accounts for 70% of employment. The agricultural sector has a small share of employment, but the jobs are generally low skilled. In the manufacturing and the construction sector, which accounts for 17% and 8% of employment respectively, many of the jobs are still low-skilled. Accordingly, vacancies for many low skilled jobs have become difficult to fill.

Although the share of immigrants in Korea’s employment has more than doubled over the past decade, mostly driven by the development of one of the largest temporary labour migration schemes in the OECD, at 3.6% in 2015 (Figure 2.20) it is still low by international comparison. About 60% of foreigners in Korea today have come through a Working Visit programme for ethnic Korean Chinese, or as temporary labour migrants under a specific scheme, the Employment Permit Scheme (EPS). This programme uses a government-to-government approach with all phases of employment – from the selection of candidates, to returning to the country of origin – defined through bilateral agreements, which assign workers to employers in a fixed number of sectors using quotas that are set annually. Since the EPS was launched, Korea has signed bilateral agreements with 16 countries of origin.

Together these programmes primarily contribute to alleviating the demand for low qualified foreign workers in SMEs, especially in the manufacturing sector, where foreign workers comprise 10% of employment, up from less than 2% a decade earlier. About one in ten employers with five or more employees rely on filling at least some vacancies with foreign workers.

According to a recently published OECD report on Recruiting Immigrant Workers: Korea (OECD, 2019[61]), the existing framework for labour migration has been successful in providing substantial labour inputs to the labour market in several sectors of the Korean economy. However, these effects have been essentially confined to low-skilled workers, which form a very specific segment of the work population. Likewise, there is room for further improvements to the existing approach, particularly with a view to ensuring that labour immigrants can access better quality jobs and that their competency profiles become more responsive to changing skills needs.

The report notes that EPS, which admits about 60 000 workers annually under a quota set by the government, strikes a balance between the employer and the worker. It contains a number of protections to prevent negative effects on local workers and to safeguard the rights of foreign workers. While the labour market test of vacancies is relatively light compared to other OECD countries there is little local competition for these jobs. The bilateral agreements with partner countries and several steps of selection limit the possibility for rent-taking, which plagues such programmes in many other countries. Employers are assigned workers according to how they perform on a points scale considering efforts to recruit locally as well as compliance with programme rules (Table 2.5). Since the introduction of the system, there have been improvements in the attribution of points to give incentive to improve working conditions. For example, bonus points were introduced to acknowledge quality housing. Reflecting the efforts to reduce working hours since 2018, two bonus points were introduced for firms reducing working hours in anticipation of the official enforcement – from 2020 for firms with 50-299 employees. Penalties for mistreatment, especially sexual violence were weighted to -5 in 2014 and doubled to -10 in 2019.

However, foreign workers remain attractive to employers mainly recruiting for low quality jobs where Korean workers have high turnover. According to a survey conducted among employers, the first reason why they hire foreign workers is that they are unable to recruit Korean workers, followed by the availability to work long hours and to accept low wages (Figure 2.21). When it comes to reasons why firms have difficulty replacing foreign workers with Korean workers, wages are again cited along with long working hours and a harsh working environment. In this setting, Recruiting Immigrant Workers (OECD, 2019[61]) recommends that continued efforts be made to provide foreign workers to those employers who strive to improve working conditions and recruit more local workers.

The OECD report also points to the limited wage growth of EPS workers during their stay in Korea and notes that mobility restrictions may make it difficult for workers who have or who develop higher skill levels to bargain for higher wages. The initial programme requirements of language ability – more than 1.7 million candidates have taken the Korean language exam since it was first offered – have expanded. Changes in the programme to select for and prioritise higher-skill workers, and to extend their stay to up to 10 years for higher productivity workers, may turn the programme into more than just an unskilled labour migration scheme.

Despite policy efforts to attract and retain highly qualified foreigners and international talent, Korea has very low flows of highly qualified migrants. Korea has many overlapping visa categories and skilled or highly qualified immigrants in Korea can cycle through many statuses during their stay. A points-based system for accelerated access to permanent residence favours education, but is only open to applicants who are already resident, and has not been evaluated to adjust the weights. Recruiting Immigrant Workers (OECD, 2019[61]) recommends to open the Point-Based System to all candidates and monitor it more closely. More broadly, the report recommends reviewing the current visa system to improve clarity and distinguish between occupations which should be labour market tested and those which should be granted more favourable access and residence conditions.

Korea has tripled its share of the international study market in the past decade. Yet only 15% of graduating international students stay on in Korea according to Recruiting Immigrant Workers, which is low compared to other countries such as France and Canada where more than three out of ten international students stay after graduation. Many of those students are on a job-search permit which is generous by international comparison, but the challenging job market for international graduates means few find work. This limits the potential of the international study channel to play the role of providing talent which it plays in other countries, even if enrolment is rising.


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← 1. Recent OECD analysis has identified three mega-trends: technological progress, demographic change and globalisation (OECD, 2019[63]). With Korea being already a major player in the world market, both as exporter and importer, out of the three acting forces the focus of the chapter will be on technological change and demographic developments, which can be expected to play a particularly important role in shaping Korea’s future labour markets.

← 2. .While this might sound like a very significant rise, it is important to bear in mind that the diffusion of other transformational technologies in the past may may have been even faster.

← 3. .However, this process will not necessarily be automatic, and policy makers should carefully monitor the possible emergence of barriers and market failures that might hinder such positive developments.

← 4. .In countries with a young and growing workforce, the opposite is likely to happen as the middle class expands and rapid urbanisation takes place. The challenge in this case will be to harness the full potential of this demographic dividend, ensuring that youth have the skills and opportunities for gainful employment, with positive implications for economic growth.

← 5. .This definition of temporary workers differs significantly from the internationally harmonised definition used by the OECD. The second and third types of temporary employment shown in Table 2.1 are not included in the international definition, whereas several of the categories of atypical workers shown in the table are included (daily, on-call and dispatched workers). Note that daily workers may have contracts somewhat longer than a single day, while dispatched workers typically would be called temporary agency workers in most other OECD countries.

← 6. .By providing additional protection for workers on fixed-term contracts these reforms, together with related reforms for dispatched and part-time workers, may have reduced the incidence of non-regular work, as measured in the EAPS by inducing employers to replace some of these workers via expanded use of in-house outsourced worker (Lee, 2012[65]). This latter type of employment may not show up as non-regular employment in Table 2.1, but raises many of the same issues about low job quality and limited career prospects.

← 7. .Although individual learning schemes fall under the umbrella of the broad denomination of “individual learning accounts (ILAs)”, many of these schemes do not formally establish the accumulation of rights over time and therefore function more properly as voucher programmes. Examples of voucher schemes include the Opleidingscheques in Flanders (Belgium), the Bildungsprämie in Germany, the Cheque formação in Portugal, the Individual Training Accounts in Scotland, the Chèque annuel de formation in Geneva Canton (Switzerland), and the Individual Training Accounts in the United States, Bildungskonto in Upper Austria (OECD, 2019[64]).

← 8. .Hakwons define themselves as private academic-focused institutions, where children age three-year-olds through to the end of secondary school age, learn particular skills, often in mathematics, languages, gymnastics and arts. Students often attend Hakwon after attending a half-day kindergarten or school programme. Usually, these private institutions have no official status in the statistics or system of education and do not receive financial support from the government.

← 9. In order to enhance the attractiveness and status of vocational education among young Koreans, a new group of vocational high schools, called Meister schools, was established in 2010. Meister schools are modelled after the German approach, with emphasis on learning a specific trade or craft that is in demand in the labour market rather than preparing for further academic progression.

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