A lively discussion is now underway concerning employment substitution between generations, since the demographic aging is progressing more rapidly in Korea than other major countries, and the baby boom generation, which makes up a huge segment of the population, are now starting to retire. Against this backdrop, this paper looks into the relationship of employment substitution between younger and older age groups by conducting (an) empirical analyses using an occupational dissimilarity index calculated based on the raw data of the economically active population, and macro variables.

The results of micro analysis based on the occupational dissimilarity index (log-linear association index), indicating the pattern of occupational distribution between the two cohorts, show that occupational competition between the younger and the higher age groups has occurred to a certain degree in some industries, but the degree of its intensification is either insignificant or has actually eased industry wide and in most industrial fields. In addition, an analysis based on a regression model using two employment indicators, the employment-population ratio and the unemployment rate, and a time-varying parameter model shows no substitution relationship in terms of employment between the younger and the higher age groups. Although the analysis based on the time-varying parameter model using the employment-population ratio partially shows a substitution relationship since the mid-2000s, (but) this is not statistically significant. This pattern appeared because the employment of the higher age group has shown brisk movements, while the employment of the younger group has declined during this period. The deterioration in the employment situation of the younger group seems attributable to structural factors such as the worsening of job mismatches arising from a decrease in the number of high quality jobs and the higher educational background of the younger group, rather than the job poaching by the higher age group.

Given these results of the analysis in the paper, it is necessary to come up swiftly with measures to minimize the negative influences of the rapid progress of the demographic aging, including the decline in the potential growth rate and the deterioration of the fiscal balance resulting from the decrease in the labor force.