Strengthening Social Cohesion in Korea

image of Strengthening Social Cohesion in Korea

Korea is confronting a serious challenges. It has to improve income equality in the context of a severe demographic transition. Such a transition, from one of the youngest populations in the OECD at present to the second oldest by 2050, may boost the need for public spending and slow economic growth. In this context and as the pace of population ageing is accelerating, it is important to act quickly in a wide range of areas:

-Policies to sustain Korea’s growth potential in the face of falling labour inputs;

-Measures that improve both growth and equality;

-Carefully-targeted increases in social spending to reduce inequality and poverty;

-Financing higher social spending, with priority given to a reform of tax and social security that minimises the negative impact on output growth.

Against the background of these broad challenges, which are discussed in a specific, setting-the-ground, Chapter, the report suggests policy options, based on the practices and reforms of other countries, in the following four areas: I) Income Distribution and Poverty; II) Tackling the Duality of the Labour Market; III) Early Childcare; and IV) Moving beyond Hospitals to better Care in the Community.

English Also available in: Korean

Policies to tackle labour market duality in Korea

This chapter examines one of the key issues in the Korean policy debates about how to stem the rise in income inequalty: labour market duality. In the context of rapid population ageing and an increasingly difficult school-to-work transition for many youth, strong dualism also threatens to lower the growth potential of the economy. Against this background, the first goal of this chapter is to provide an empirical overview of labour market dualism in Korea and compare the main patterns which emerge with those observed in other OECD countries. This analysis confirms that dualism is unusually strong in Korean and is an important source of earnings inequality and the highest rate of labour turnover in the OECD area. The chapter also identifies effective policy strategies for reducing labour market duality. It argues that well designed policies can reduce the most harmful aspects of duality and thus contribute to stronger and more equitable growth in Korea.


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