November 11, 2021 12:22
Korea's rapidly declining working population has been cited as the main culprit in the OECD's recent forecast of decades of economic stagnation.
The country's working-age population has been declining since 2019, and the core working population aged 25 to 49 peaked at 21.01 million in 2008 and has been falling since.
A drop in the working-age population leads to a decline in GDP and the pace of economic growth slows down. Fiscal spending increases to cover welfare payments for the elderly, but the number of working citizens who pay for them with their taxes shrinks.
Labor input will inevitably decline, so it becomes essential to recover the potential economic growth rate by boosting productivity.
Research consultancy Capital Economics in a report titled "Korea: the Next 30 Years" said, "Korea has performed relatively well through the pandemic, and we expect the economy to emerge from the crisis with little lasting damage. However, the long-run outlook is less promising. Although productivity growth is likely to accelerate, it will not do so by enough to compensate for a decline in the working-age population."
Korea's hourly productivity stands at US$41.8 an hour, up from $32.1 an hour a decade ago, but still lags behind the average of $54 an hour among the 38 member countries of the OECD and is only two-thirds the G7 average of $65 an hour.
Only eight OECD member countries including Columbia and Mexico have lower hourly productivity levels than Korea.
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