Title : The Outlook and Challenges of Population Aging and Labor Market

Author : Chulhee Lee(Seoul National University), Jieun Lee(BOK)

<Abstract>

The size of the labor force will diminish with on-going population aging. However, the magnitude of the anticipated decline remains unclear and differs according to the choice of labor input measure. If the current patterns of gender- and age-specific labor supply would remain unchanged, it is projected that the number of employed population and the total hours of work will decrease to 88% and 83% of the current levels, respectively. The actual decline in labor inputs will heavily depend on long-term changes of labor supply, especially employment of the elderly and women as well as unemployment of younger people. Given that long-term trend of labor demand is highly unpredictable, it is difficult to determine whether a large-scale decline in the work force (if actually emerged) will cause significant labor shortages. Furthermore, the extent of labor shortage will widely differ across industries and across worker types because of sectoral disparities in labor-demand changes. Over the next 10~15 years, the overall size of labor inputs in Korea will not diminish. However, the exit of the baby boom generation from the work force can produce serious labor shortages in sectors with high and increasing fractions of aging workers. In particular, population aging will hit hard the industries in which the entry of young workers is insufficient to meet rapidly growing labor demand.