Korea’s economic participation rate to peak in 2021

Korea’s economic participation rate is expected to peak in 2021 and start decreasing afterwards in the wake of the country`s rapidly aging population.

According to a report by the Korea Development Institute on changes in the labor market for the post-baby boomers` generation, the economic participation rate will stay at 61.2 to 61.5 percent until 2020 and peak at 61.6 percent in 2021. Afterwards, it is expected to plummet to the 50-percent range in 2030 at 59.9 percent. The economic participation rate is different from the accession rate and refers to the ratio of the employed and jobseekers among all potential workers aged 15 and over.

A rapid spike in the number of aged workers is likely to sap the economy`s vitality. The country`s core workforce, or people aged 30 to 54, accounts for 64 percent but this will drop to 53 percent by 2030. On the other hand, the ratio of workers aged 55 and over will increase from under 20 percent now to 28 percent in 2020 and 35 percent in 2030.

The main reason for the expected drop in the economic participation ratio is a labor shortfall after the retirement of baby boomers. The number of baby boomers born between 1955 to 1963 is 7.14 million while that of their replacements, or those born between 1985 to 1993, is just 5.96 million, or more than a million less, said researcher Hwang Soo-gyeong, the author of the report. “After 2020 when all baby boomers turn 55 years or older, the situation will become worse.” Those born in the 1990s, when the era of the low birth rate began, are entering the Korean labor market. A decade later, however, those born in the 2000s, which saw an even lower low birth rate, will be the main source for the labor market.

To solve this problem, the Korea Development Institute suggested a system to help senior citizens work longer, proposing abolishing the retirement age and prohibiting pension payments before reaching retirement age to prevent an income drought period for senior citizens.

jarrett@donga.com