https://www.oecd.org/economy/korea-economic-snapshot/ 2022 OECD ECONOMIC SURVEY OF KOREA Stunning success and work in progress 19 September 2022, Sejong @OECDeconomy
2
Source:
OECD Economic Outlook database. Real GDP level 10710510310199979593918987 2019Q4 2020Q2 2020Q4 2021Q2 2021Q4 2022Q2 Korea OECD Index 2019Q4=100
Skilful policies cushioned the recession and allowed for a rapid rebound from the COVID-19 crisis
-10-8-6-4-2024 GRC USA ITA GBR CAN NZL DEU NLD AUS FRA IRL CZE CHE LTU LUX FIN KOR JPN DNK EST SWE ESP PRT POL NOR A. Change in underlying primary balance 2019-2021 %-points 1614121086420 quintileBottom Secondquintile Third quintile Fourth quintile Top quintile 2019 2020 Y-o-y %-changes B. Household disposable income by income groups
3 Fiscal policy supported household disposable income during the pandemic
Source: Economic Outlook database; and Statistics Korea.
4 Inflation has risen fast Note: The last observation is August 2022. Source: OECD, Economic Outlook Database. -0,500,511,522,533,544,555,56 2010 11 12 13 14 15 16 17 18 19 20 21 22 CPI CPI excluding food and energy 2.5 -3.5% 2% CPI Inflation target 2-4% Y-o-y %-change Inflation
Statistics Korea. Net job creation in Korea, y-o-y -1000-500050010001500 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Thousands
5
Source:
The labour market has recovered
6 The recovery is slowing 1. % of Source:GDP.OECD (2022), Economic Outlook 111 (database), projections revised as of 8 September 2022. Macroeconomic indicators Annual percentage changes unless specified, volume (2009/10 prices) 2021 2022 2023 Gross domestic product 4.1 2.8 2.2 Private consumption 3.7 3.7 2.4 Government consumption 5.6 3.8 3.0 Gross fixed capital formation 2.8 -1.5 2.8 Exports 10.8 4.7 3.2 Imports 10.1 2.6 4.2 Unemployment rate (% of the labour force) 3.6 2.9 2.6 Consumer price index 2.5 5.2 3.9 Current account balance¹ 4.9 4.3 4.0 General government fiscal balance¹ -0.8 -0.1 0.6 General government gross debt¹ 46.4 46.8 46.1
A billboard in Seoul shows the level of particle pollution in real time.
SUPPORTING THE RECOVERY AND THE GREEN TRANSITION
7
GDP
250200150100500 KOR DEU CAN OECD USA FRA GBR ITA JPN % of GDP A. General government gross debt (National Accounts definition), 2021 160140120100806040200 2022 2030 2040 2050 2060
of
Raising employment rate to average for youth efficiency increase of health expenditure increase in pensionable age of
Source: OECD (2022), OECD Economic Outlook: Statistics and Projections (database), June; OECD calculations based on the OECD Long-term model.
OECD
%
Government debt remains low, but will be put under pressure by ageing
8
Note: Debt simulations are based on the OECD Long Term Model. More detailed scenario assumptions are outlined in OECD Economic Surveys: Korea 2022.
B. General government gross debt scenarios
ClosingBaseline2/3 gender employment gap
20%
Faster
OECD, Air and climate statistics (database). Total greenhouse gas emissions, excl. LULUCF 8007006005004003002001000 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2030 Target 2050 Target Emissions (Mt CO2-e)
9
Reaching Korea’s emission reduction targets calls for bold and efficient policies
Note: LULUCF Source:
stands for land use, land use change and forestry.
10 There is large scope to reduce emissions from electricity production
Source: emissions by sector
Greenhouse Gas Inventory & Research Center of Korea; Korean statistical information service. 300250200150100500 2005 2007 2009 2011 2013 2015 2017 2019 Public electricity and heat production Manufacturing and construction Transportation Agriculture Emissions (Mt CO2-e) GHG
• Align the emission trading scheme cap with domestic emission reduction targets and expand its coverage.
• Gradually consolidate the fiscal position.
Recommendations to support the recovery and the green transition
• Continue to move towards a less accommodative monetary policy stance with a view to keep inflation expectations in check.
• Adopt the new fiscal rule and ensure the rule is followed.
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• Comprehensively review the institutional framework hindering the carbon price from passing through and holding back emission reductions in the electricity sector.
• Auction a larger share of emission trading scheme allowances, link auctioning revenue to subsidies for green technologies and infrastructure.
ANDPRODUCTIVITYREDUCINGGAPSLABOURMARKETDUALISM
12
A badge for pregnant women can be used for example to access reserved seating in the subway.
P90/P50
13
average
AUTBELDEU DNK ESP FINFRA GBR GRC HUNIRLITA JPN LUXKOR NLD POL PRT SWESVN TUR OECD2,21,81,61,41,22 1,4 1,6 1,8 2 2,2 2,4 2,6
ratio in the firm distribution of labour productivity
income
Note: More information on the data can be found in OECD Economic Surveys: Korea 2022.
Wage differences mirror productivity gaps
P90/P50 ratio in the firm distribution of labour
Source: Statistics Korea and OECD (2018), Economic Survey of Korea 2018.
income inequality
Labour and productivity disparities between firms
14 Non-regular workers are less likely to be covered by social insurance and company benefits 1009080706050403020100 Employment Insurance NationalInsuranceHealth NationalSystemPension Bonus payment Company pension Union membership % Regular workers Non-regular workers Source: Ministry of Employment and Labour, Survey Report on Labour Conditions by Employment Type. Coverage by social insurance and company benefits
15
Many women face a choice between family and career
-0,5-1,5-2,5-3,5-4,5-4-3-2-100,5 Less than 24 25-34 35-44 45-54 55-64
OECD Korea Log likelihood of employment
Women's employment gap to men following childbirth
Note: The shaded area spans all OECD values. Model assumptions are outlined in OECD Economic Surveys: Korea 2022. Source: Pareliussen (2022), forthcoming.
• Move towards greater public financing of maternal, paternal and parental leave.
• Break down labour market dualism by relaxing employment protection for regular workers and making it more transparent, while expanding social insurance enrolment and training for non-regular workers.
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Recommendations to reduce productivity gaps and labour market dualism
• Expand the coverage of SME graduation schemes to ensure that public support for SMEs encourages the growth of innovative firms rather than the survival of non-viable ones, while supporting affected workers and providing training and employment services.
• Reduce the stringency of product market regulation.
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STRENGTHENINGTHESOCIALSAFETYNET
1. The poverty rate is the share of the number of people living with less than half of the median disposable income. Wealth, which increases consumption possibilities and is typically higher among older generations, is not reflected.
Poverty rates¹, 2020
%
Source: OECD Income distribution (database).
454035302520151050 ISL DNK NOR FRA LUX FIN GRC DEU SWE ITA CAN POL SVN HUN OECD GBR CRI CHL MEX JPN USA AUS LTU EST KOR
18
Old-age poverty rate Poverty rate
The poverty rate is high, notably for the elderly
Workers who are legally excluded from compulsory insurance programmes (institutional gaps) 38%
Employment insurance status, % of total number of employed, 2019
Source: OECD calculations based on Jung E. (2020) and Jung H. (2020).
Insured48%workers
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Around half of the entire labour force in Korea does not have access to employment insurance
Workers who do not contribute despite their legal obligation (effective gaps)14%
Most are below the poverty line, notably for women
2021 Note: Pensions refer to all types of old-age pensions from the National Pension Service including full old-age pension (완전 노령 연금), early old-age pension (조기노령연금), reduced old-age pension (감액노령연금), and special old-age pension (특례 노령연금). Source: National Pension Service; and OECD Pensions at a Glance 2021. 2.500.0002.000.0001.500.0001.000.000500.00000-200 200-400 400-600 600-800 800-1000 1000-1300 1300-1600 1600-2000 2000Persons 1000 KRW per month Total Men Women Poverty threshold Minimum monthly wage
of
Distribution pensioners by pension amounts,
pensions
20
Share
1. Unweighted average for the countries displayed in the figure and Belgium, Estonia, Greece and Spain.
21
Health care is unaffordable for many
2. Catastrophic health spending is defined as out-of-pocket payments that exceed 40% of household income.
Source: OECD Healthcare at a Glance, 2021.
1614121086420 SVN CZE IRL GBR SWE FRA LUX DEU JPN CHL AUS AUT FIN TUR SVK OECD28¹ MEX USA KOR POL ITA PRT HUN LVA LTU % Richest4th3rd2ndPoorestQuintileQuintileQuintile
of households with catastrophic health spending² by consumption quintile
• Pursue a broad pension reform to secure adequate old-age income. In this context, conditional on the reform of the National Pension System, consider lowering the basic pension income threshold and increasing the benefit level to better target those with the highest needs.
• Raise the pension eligibility age further than currently legislated by 2035 and link it to life expectancy thereafter, and align the maximum contribution age to the pensionable age.
• Transition severance pay into individual pension accounts by capping and gradually reducing the amount available for early lump-sum withdrawals and limiting permitted causes.
Recommendations to strengthen the social safety net
• Harmonise long-term care insurance and healthcare insurance reimbursement schemes.
• Include the self-employed in compulsory employment insurance, accompanied by more effective enforcement measures.
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PROMOTINGEMPLOYMENTYOUTH
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24 Youth employment is below the OECD average 8070605040302010080706050403020100 GRC ITA CHL ESP CRI TUR SVK PRT BEL KOR CZE SVN LVA FRA COL HUN ISR POL LTU MEX LUX EST IRL SWE FIN USA DEU JPN DNK AUT NOR GBR CAN NZL AUS CHE ISL NLD %% Weighted OECD average in 2021 Source: LFS by sex and age, OECD.Stat, accessed 17 June 2022. The percentage of employed persons in the 15-29 age group (2021)
25 Education increases the chances to land a good job in a large company or the public sector 2520151050% A. Young people’s (age 13-34) intentions to work in large firms or the public sector 1009080706050403020100 High School College University Masters or higher % 1-9 10-99 100-299 300+ B. Allocation of workers by education and firm size (number of employees)
Statistics Korea, 2021 Social Survey; OECD (2019), Investing in Youth: Korea.
Source:
of tertiary graduates among 25–34-year-olds 706050403020100706050403020100 MEX ITA COL HUN CRI CZE CHL DEU TUR ISL SVK AUT PRT POL EST GRC NZL LVA FIN SVN DNK ISR ESP BEL SWE FRA NOR USA NLD CHE AUS GBR LTU LUX IRL JPN CAN KOR %% Unweighted OECD average
Korean youth are highly educated
26
Share
Source: OECD (2021), Education at a Glance.
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Credentials and skills do not always match what employers demand
Source: World Economic Forum, Global Competitiveness Report 2019; Montt (2015). 6050403020100 FIN NLD FRA AUS KOR % B. Rate of field-of-study mismatch 6543210 TUR ITA KOR SWE CHE Score A. International ranking of the skillset of graduates
• Improve vocational education and training.
• Consolidate the already large number of programmes to boost youth employment and focus on improving the effectiveness of existing schemes.
• Reduce productivity gaps and labour market dualism.
• Allow students more scope to develop their individual interests and talents, notably by reducing the emphasis on the standardized university entrance exam.
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• Promote competition and quality improvement in universities.
Recommendations to promote youth employment
https://www.oecd.org/economy/korea-economic-snapshot/
TheDisclaimers:statistical
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@OECDeconomy
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