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Key Challenges Facing Policymakers:
Lessons from Japan and Korea
Institute for Korean Studies
Indiana University
7 September 2016
8
Randall S. Jones
Head, Japan/Korea Desk, OECD
Organization for Economic
Cooperation and Development
2
The OECD publishes biannual economic surveys of
member countries and key emerging economies
www.oecd.org/eco/surveys/economic-survey-japan.htm
www.oecd.org/eco/surveys/economic-survey-korea.htm
3
Korean government’s view of the
benefits of membership in the OECD
“For Korea, membership in the OECD has
provided an opportunity to exchange ideas with
the most advanced countries and to learn best
practices. The OECD has played a crucial role in
developing and advancing Korea during the past
two decades. Moreover, the OECD is Korea’s most
trusted policy advisor. Korea has seriously taken
the OECD’s recommendations into account and
reflected them in its economic policies.”
Government of Korea, preface to the 2016 OECD
Economic Survey of Korea
4
Four key challenges facing
policymakers
1. Rapid population ageing
2. Weak productivity and economic growth since
the global financial crisis
3. Rising inequality and relative poverty
4. High levels of government debt
5
Japan’s population will remain the oldest in the OECD
while population ageing in Korea will be the fastest
Population aged 65 and over as a share of the working-age population (15 to 64)
Source: OECD Demography and Population Database.
6
The labour forces in Japan and Korea are
both projected to decline significantly
1. For the working-age population (15-64), assuming that the labour force participation rate for men remains
constant from 2011 to 2030.
2. The participation rates for men and women are assumed to remain at their current levels for each age group.
3. Female participation rates are assumed to reach current male rates in each age group by 2050.
Source: OECD calculations based on national population projections.
7
Employment rates in Korea are low
for women and youth
Per cent
Per cent
80.0
80.0
Korea
OECD average
70.0
70.0
60.0
60.0
50.0
50.0
40.0
40.0
30.0
30.0
Working-age
population
Women
Youth (15-29)
Adults (30-54)
Older persons (55-64)
Source: OECD Employment Outlook Database.
8
The take-up of maternity and
parental leave in Korea is low
As a percentage of the number of births each year
Source: Yoon (2014).
9
Working hours are long in Korea for
both men and women
Source: OECD Family Database.
10
The gender wage gap is large in both
Korea and Japan
In 2013 or latest year available for full-time employees1
1. The difference between median earnings of men and women relative to median earnings of men.
Source: OECD Earnings Distribution Database.
11
Women in Korea are concentrated in
non-regular jobs
Employees by employment status as a percentage of total employment in 2015
1. Includes temporary employees and atypical workers (dispatched, daily on-call, in-house, independent contractors, etc.).
Source: Statistics Korea, Economically Active Population Survey, August 2015.
12
The share of women in management
is low in Korea and Japan
Source: OECD Family Database.
13
Policies to raise the
employment of women
1. Increase the take-up of maternity and parental
leave.
2. Improve work-life balance by reducing working
time.
3. Decrease the gender wage gap.
4. Reduce the share of women in non-regular
employment.
5. Increase the share of women in management.
The rate of NEETs in Korea is high for
tertiary graduates
As a share of the 15-29 age group¹
1. “Neither in employment nor in education or training.
Source OECD (2015), Education at a Glance 2015.
15
Youth employment rates are positively
correlated with those of older workers
Per cent in 2014
Source: OECD Labour Force Statistics Database.
16
Four key challenges facing
policymakers
1. Rapid population ageing
2. Weak productivity and economic growth since
the global financial crisis
3. Rising inequality and relative poverty
4. High levels of government debt
17
… productivity isn't
everything, but in the long
run it is almost everything.
Paul Krugman,1994
18
Explaining differences in income (in 2014)
1. Using 2014 PPP exchange rates.
Source: OECD (2016), Going for Growth 2016.
19
Productivity growth slowed across the
OECD even before the crisis
Labour productivity growth since 1990
GDP per hour worked (China and India refer to GDP per worker)
Source: OECD calculations.
20
The convergence in Korea’s
productivity level has stalled
Gap compared to the top half of OECD countries1
Per cent
0
-10
-20
-30
-40
-50
-60
-70
-80
1991
1995
1999
2003
2007
2011
2015
1. Percentage gap with respect to the weighted average using population weights of the highest 17
OECD countries in terms GDP per hour worked.
Source: OECD, National Accounts and Productivity Databases.
21
Output growth in Korea has slowed toward
the OECD average
GDP growth at an annual average rate in per cent
Source: OECD Analytical Database.
22
Policies to raise productivity
1.
2.
3.
4.
5.
6.
7.
Relax government regulations
Facilitate the entry and exit of firms
Upgrade human capital
Improve the innovation system
Enhance openness to international competition
Address problems in the SME sector
Promote venture capital investment
Priority #1: Reduce the stringency of
government regulation
The indicator ranges from zero (most relaxed) to three (most stringent)
Source: OECD Product Market Regulation Database; Koske et al. (2015).
24
Priority #1: Productivity in Korea is much lower in
services, where regulation is more stringent
Manufacturing = 100; in 2014 based on 2010 prices
Source: OECD National Accounts Database; OECD STI Database.
25
Priority #2: Reduce barriers to
entrepreneurship, which are high in Korea
Source: OECD Product Market Regulation Database; Koske et al. (2015).
26
Priority #2: Small firms in Japan are old,
suggesting barriers to entry
Source: Criscuolo et al. (2014).
27
Priority #2: Poor image of entrepreneurship in
Japan and Korea discourages firm creation
Share of respondents with a broadly favourable image of entrepreneurs
Source: OECD (2013), Entrepreneurship at a Glance 2013.
28
Priority #3: Upgrade human capital
particularly of older workers
Share of the population with a university degree in 2013
Source: OECD Education at a Glance Database.
29
Priority #3: Upgrade the skills of older
workers in Korea
Share of the population with a good ability to use computers and solve problems
Source: OECD (2013), The Survey of Adult Skills: Reader’s Companion.
30
Priority #4: Improve the innovation system by increasing
R&D links between different sources of research
R&D funding in Japan in 2013
Allocation of R&D spending by sector performing it
Source of funding
Share of total
R&D spending
Government
Universities
Business
enterprises
Total
Government1
18.1
54.4
40.2
5.4
100.0
Universities
5.9
0.6
99.3
0.1
100.0
Business
enterprises
75.5
0.6
0.5
98.9
100.0
Foreign sources
0.5
9.6
1.6
88.8
100.0
1. Includes private non-profit institutes.
Source: OECD R&D Statistics Database.
31
Priority #4: Improve the innovation system by
increasing Japan’s links to global networks
Ranking of national science and innovation systems in 2014
Source: OECD Science, Technology and Industry Outlook.
32
Priority #5: Enhance international openness
by reducing barriers to trade and investment
The indicator ranges from zero (most relaxed) to three (most stringent), 2013
Source: OECD Product Market Regulation Database; Koske et al. (2015).
33
Priority #5: Enhance international
openness by increasing inflows of FDI
Inward and outward stocks of direct investment as a per cent of GDP in 2013¹
1. Belgium (189,200), Ireland (231,173), Luxembourg (301,234), The Netherlands (134,83.7) and
Switzerland (194,115).
Source: OECD, Economic Globalisation Indicators 2014.
34
Priority #6: Address problems in the SME sector
by reducing the number of zombie firms
Number of SMEs in Korea with negative operating profits for at least three
consecutive years
Source: Shin (2015), “Analysis and Implications of Marginal Companies”, KOSBI SME Focus,
Vol.15-14, Korea Small Business Institute, Seoul.
35
Priority #6: Address problems in the SME
sector by reducing government guarantees
Government guarantees for loans to SMEs in 2014 as a percentage of GDP
Source: OECD (2016), Financing SMEs and Entrepreneurs 2016: An OECD Scoreboard.
36
Priority #6: Address problems in the
SME sector to encourage firms to grow
Post-entry growth: the average size of young and old firms
Source: C. Criscuolo, P. N. Gal and C. Menon (2014),
37
Priority #7: Make greater use of
venture capital investment
In 2013 or latest year available
Source: OECD, Entrepreneurship at a Glance 2014.
38
Priority #7: Focus venture capital
investment on start-ups
Venture capital investment per firm by age in Korea
Source: Korea Venture Capital Association.
39
Four key challenges facing
policymakers
1. Rapid population ageing
2. Weak productivity and economic growth since
the global financial crisis
3. Rising inequality and relative poverty
4. High levels of government debt
40
Korea has experienced rising income
inequality and relative poverty
Source: Statistics Korea.
41
Japan and Korea have high rates of
relative poverty
Share of the population with an income below half of the national median
Source: OECD Income Distribution and Poverty Database.
42
The impact of the social safety nets on income inequality
and relative poverty are weak in Japan and Korea
1.
The Gini coefficient can range from 0 (perfect equality) to 1 (perfect inequality).
2.
The relative poverty rate is the percentage of households whose income is less than
half of the median income.
Source: OECD Income Distribution and Poverty Database.
43
Wage inequality is high in Korea
Share of full-time workers earning less than two-thirds of median earnings1
1. Including bonuses. In 2013.
Source: OECD Demography and Population Database.
44
Around one third of employees in Korea
and Japan are “non-regular” workers
Employed persons by status in Korea
Of which1
Year
Wage
workers
Non-regular
workers
Contingent (temporary) workers
Fixed-term workers
Atypical workers
Open-ended
contract
workers2
Part-time
workers
Dispatched
Others
Thousand
Thousand
%
Thousand
%
%
%
%
%
2003
14 149
4 606
32.6
2 403
52.2
13.3
20.2
2.1
34.3
2005
14 968
5 483
36.6
2 728
49.8
16.2
19.0
2.2
32.6
2007
15 882
5 703
35.9
2 531
44.4
17.8
21.1
3.1
35.7
2009
16 479
5 754
34.9
2 815
48.9
12.1
24.8
2.9
36.8
2011
17 510
5 995
34.2
2 668
44.5
13.0
28.4
3.3
37.2
2014
18 776
6 077
32.4
2 749
45.2
12.6
33.4
3.2
31.6
1. The sum of the categories of non-regular workers exceeds 100% due to double-counting.
2. Workers whose employment contract term is not fixed but whose employment can continue through repeated renewals of the contract or
is not expected to continue due to involuntary reasons.
Source: Statistics Korea, Economically Active Population Survey.
45
Non-regular workers earn less than
two-thirds as much as regular workers
Hourly wages of non-regular workers relative to regular workers in Korea (regular workers = 100)
Of which1
Contingent (temporary) workers
Year
Regular
workers
Nonregular
workers
Fixed-term
workers
Open-ended
contract workers2
Atypical workers
Part-time
workers
Dispatched
Others
2003
100.0
71.6
70.7
69.1
85.1
68.0
n.a.
2005
100.0
70.5
74.5
66.0
76.7
76.1
n.a.
2007
100.0
70.9
76.3
75.4
66.6
70.8
n.a.
2009
100.0
61.5
65.5
58.2
56.2
69.7
n.a.
2011
100.0
65.3
69.0
70.5
59.3
66.5
n.a.
2014
100.0
64.3
67.8
67.5
54.0
60.8
n.a.
1. The sum of the categories of non-regular workers exceeds 100% due to double-counting.
2. Workers whose employment contract term is not fixed but whose employment can continue through repeated renewals of the contract or is
not expected to continue due to involuntary reasons.
Source: Statistics Korea, Economically Active Population Survey.
46
Non-regular workers have lower income
Annual earned income in Korea (before tax)¹
1. In households headed by regular and non-regular workers. Households with two or more persons.
Source: Korea Labour Institute, Korean Labour and Income Panel Survey (KLIPS); OECD calculations.
47
The poverty rate is higher among nonregular workers
Relative poverty rate in Korea based on the employment status of household head¹
1. Household head under age 60. Households with two or more persons.
Source: Korea Labour Institute, Korean Labour and Income Panel Survey (KLIPS); OECD calculations. 48
Education spending is lower
in non-regular households
Monthly expenditure in Korea based on the employment status of household head¹
1. Households with two or more persons. Up to age 18. Private education cost includes private tutoring institutions
(hagwons), private tutors, and early childhood education and care.
Source: KLI, Korean Labour and Income Panel Survey (KLIPS); OECD calculations.
49
Poverty rates are high for persons
over 50 in Korea
Relative poverty rate in per cent1
1. Defined as a the share of the population with an income below half of the national median.
Source: OECD Income Distribution Poverty Database.
50
The first-tier pension benefit in Korea is
low while elderly poverty is high
First-tier pension benefits¹ and the elderly poverty rate² in 2014 or latest year available
1. The first-tier pension benefit as a percentage of the average wage. The first-tier pension is a non-contributory,
safety-net pension for the elderly. In Korea, this refers to the Basic Pension.
2. Share of the elderly in relative poverty – an income below 50% of the national median.
Source: OECD Pensions at a Glance (2015).
51
The coverage of the first-tier pension benefit
in Korea is high
Coverage of the first-tier pension¹ in 2012 or latest year available
1. The first-tier pension benefit is a non-contributory, safety-net pension for the elderly. In Korea,
this refers to the Basic Pension.
Source: OECD Pensions at a Glance (2015).
52
Four key challenges facing
policymakers
1. Rapid population ageing
2. Weak productivity and economic growth since
the global financial crisis
3. Rising inequality and relative poverty
4. High levels of government debt
53
Korea has a consistent government budget
surplus in contrast to major OECD economies
Source: OECD Analytical Database.
54
Japan’s level of gross government debt
relative to GDP is the highest in the OECD
As a per cent of GDP in 2014 or latest year available
Source: OECD Economic Outlook Database.
55
Public social spending in Korea is low
As a per cent of GDP in 2014
Source: OECD Social Expenditure Database.
56
But government social spending in Japan
has doubled as a share of GDP
Source: OECD Economic Outlook Database.
57
The gap between government expenditure
and revenue is large in Japan
Note: Central government general account as per cent of GDP.
Source: Ministry of Finance; OECD calculations.
58
Japan and Korea have relatively low tax
revenue as a share of GDP
As a per cent of GDP in 2014
Source: OECD Analytical Database.
59
Japan and Korea have scope to further
raise its consumption tax (VAT)
Standard tax rate in 2014¹
1. In January 2014, except for Japan, which reflects the consumption tax hike to 8% in April 2014.
Source: OECD, Consumption Tax Trends 2014.
60
Japan needs all three arrows of Abenomics
to achieve fiscal sustainability
1. Bold monetary policy to exit deflation
2. Flexible fiscal policy
3. A growth strategy to boost real output growth
to 2% over the next decade
61
Reducing government debt requires fiscal
consolidation while boosting real growth and inflation
Gross government debt as percentage of GDP¹
1. In the no fiscal consolidation scenario, nominal growth is around 2¾ per cent (1% real growth, 1¾ per cent inflation).
Fiscal consolidation of 7% of GDP over the decade 2017-26 is assumed in the other two scenarios. Output growth rates over 201540, resulting in varying levels of interest rates:
Slow growth: nominal growth of 1½ per cent (1% real growth, ½ per cent inflation).
High growth: is nominal growth of 4% (2% real growth and 2% inflation).
Source: OECD Economic Outlook Database; OECD calculations.
62
The income gap between North and
South Korea is enormous
Comparison of North and South Korea in 2014
(A)
(B)
Ratio (B/A)
North Korea
South Korea
Population (millions)
24.7
50.4
2.0
Gross National Income (trillion won)
34.2
1 496.6
43.7
Gross National Income per capita
(million won)
1.4
29.7
21.4
Total trade ($ billion)
7.6
1 098.2
144.3
Exports
3.2
572.7
181.2
Imports
4.5
525.5
118.1
Of which: inter-Korean exports1
1.2
1.1
0.9
1. North Korean exports to the South in column Panel A, and South Korean exports to the North in column B.
Source: Statistics Korea; Bank of Korea.
63
詳細は…추가 정보…
More information…
www.oecd.org/eco/surveys/economic-survey-japan.htm
www.oecd.org/eco/surveys/economic-survey-korea.htm
64