"Improving Job Quality for Women and Elderly to Boost South Korea's Economic Growth Rate"

IMF "Increasing Gender Equality Can Boost Economic Growth Rate"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] An analysis has emerged suggesting that improving the productivity of female and elderly workers is essential to effectively boost South Korea's economic growth rate. Although social structural changes have increased the economic participation of women and the elderly, simply increasing labor participation can actually reduce productivity. This is because wages and job quality for women and elderly workers in Korean society are relatively lower compared to young men.

On the 16th (local time), the International Monetary Fund (IMF) stated in a conference report titled "Women in the Labor Force: The Role of Fiscal Policies" that "the global average female labor force participation remains 20 percentage points lower than that of men," and emphasized that "gender equality raises economic growth rates and leads to social development." Christine Lagarde, former IMF Managing Director, also pointed out during her visit to Korea in 2017 that "reducing gender discrimination in the labor market could increase South Korea's Gross Domestic Product (GDP) by about 10%."

According to the IMF, since the 1980s, countries have implemented policies to improve gender equality. As of 2018, 80 countries worldwide have enacted related fiscal policies, with examples including childcare cost support and mandatory parental leave.

However, the IMF points out that simply increasing women's labor participation rates is insufficient. Citing a paper by Jongseok Han, a research fellow at the Korea Institute of Public Finance, and Jonghwa Lee, a professor at Korea University, the IMF noted that "(in the current Korean context) increased economic participation of women and the elderly results in a further decline in human capital," explaining that "this is because the quality of jobs and wages for women and the elderly are relatively low." Human capital refers to capital that can increase economic value or productivity through education or vocational training.

According to the paper titled "Korea's Demographic Changes, Human Capital, and Economic Growth," the absolute quantity of labor's impact on South Korea's economic growth rate is decreasing, while the contribution of human capital growth rate is increasing.

Based on calculations using Bank of Korea GDP data, the report shows that the contribution of labor to GDP growth, which was 1.84% during 1986?1995, dropped to 0.30% in 1996?2005, 0.13% in 2006?2010, and 0.28% in 2011?2017 following the Asian financial crisis. The absolute labor growth rate also plummeted from 3.28% in 1986?1995 to 0.55% in 2011?2017. As the absolute amount of labor sharply decreases and its contribution to growth weakens, increasing labor does not positively impact the economic growth rate.

In contrast, the human capital growth rate has maintained a relatively high level: 0.88% in 1986?1995, 1.14% in 1996?2005, 1.11% in 2006?2010, and 0.68% in 2011?2017.

The paper explains, "During the financial crisis, Korea's employment rate significantly declined, and the average working hours per person also decreased, leading to a reduction in labor volume. Nevertheless, growth was sustained because human capital based on education supported it."

Therefore, to increase human capital, which has a high contribution to GDP, the paper points out that improving job quality through female education and raising the human capital growth rate will consequently increase the economic growth rate. It warns that if the productivity of women and the elderly does not improve, the decline in growth rate could be even greater.

The paper advises, "Since Korea's educational achievements are already at a high level, rather than further increasing the quality of female education, enabling women who have already entered the workforce to maintain continuous careers without interruption is the way to raise the human capital growth rate." It also states, "For the elderly, continuous job training to secure better jobs is a way to improve productivity and wages." The IMF also emphasized that "in advanced countries, changes in tax systems and paid maternity leave and childcare subsidies are important, while in low-income countries, raising labor productivity through education is crucial."