Authors : Sunyoung Jung(the Bank of Korea)
Population aging has had an enormous effect on the labor force across years or even generations. First, the long-term job growth rate has become slower and we can see an steadily increasing trend in employment over the age of 40. Second, employment has become less volatile due to the shrinking share of workers aged 20s and lower volatility of employment aged 50 and over since 2000. Employment volatility of elderly workers has become lower because they cannot flexibly respond to business cycles because large amount of them are livelihood type self employers and they have relatively low income and their employment status is unstable. Lastly, population aging has an significant effect on the change in comovement between the business cycle and employment. Specifically, the fact that the center of gravity on employment has been changed into workers aged 40 and over, together with lower comovement for workers aged 20-30s, leads to decoupling relationship between the business cycle and employment.
To sum up, problems in Korea’s labor market caused by population aging can be largely summarized into the shrinking youth employment and insufficient decent jobs for elderly workers. Therefore, to prepare effectively for aging society, we should not only create a healthy working environment for elderly workers but also increase the absolute amount of youth employment.