[2015-10] Estimation of Quality of Employment and Analysis of Its Spillover Effects on Labor Productivity

Productivity Employment Growth Widening Structure
Research Department

   The number of persons employed, or the quantity of employment, has been constantly rising even in the low growth environment since the global financial crisis. On the other hand, the quality of employment has not improved sufficiently, due to the deepening of the dual structure of the labor market and the widening of wage gaps. If the quality of employment improves, the quality of life improves accordingly, and a virtuous cycle between employment and growth can be strengthened through increased labor productivity. From this perspective, increasing the number of high-quality jobs is one of major tasks of the Korean economy. This paper estimates the quality of employment in Korea and conducts an empirical analysis of its spillover effects on labor productivity, and then proposes policies to increase the number of high-quality jobs.


   First, this paper calculates five of the main quality of employment indicators: job stability, wages, working hours, skill development, and industrial safety. The results show that Korea is relatively strong in the areas of wages and skill development, but is weak in the areas of job stability, working hours, and industrial safety. Next, this paper conducts an empirical analysis of the relation between the quality of employment indicators and labor productivity, using a dynamic panel data regression model and a panel VAR model to analyze the panel data of OECD countries from 2001 to 2013. The results show that an improvement in the quality of employment has worked to boost labor productivity and improvement in areas such as job stability, wages, and skill development is important. In addition, this paper finds that improving the quality of employment has the effect of significantly increasing both GDP and labor productivity.
   The results of the analysis suggest that, to expand the growth potential through improvements in labor productivity, priority should be given to the areas with weak employment quality. Therefore, preventing the abuse of temporary workers, narrowing the gap in working conditions between regular and temporary employees, expanding social security nets, and other such efforts to improve the dual structure of the labor market will be necessary going forward. In addition, the focus of the government's job creation schemes should be placed on increasing high-quality jobs rather than temporary low-paid positions for the youth and other vulnerable groups.


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