Assessment and Outlook on Labor Supply Trends in Korea: Labor Force Participation of the Elderly Population

Abstract

The labor force participation rate (LFPR) among the elderly (55 years and over) saw significant growth in the 2010s, but it varied across gender and age group. Women under 65 had a strong increase in their participation rate, while men under 65 showed a less pronounced rise and even signs of a decline after the mid-2010s. Additionally, men and women aged 65 and above experienced a significant increase in their participation rate after the mid-2010s.

Factors contributing to the participation rate within the elderly population differed by gender and age. Female seniors under 65 benefited from improved education levels and more jobs in the service sector, while male seniors under 65 faced reduced labor demand due to technology and industrial changes. Seniors aged 65 and above saw increased participation mainly due to the Senior Employment Program.

If labor market conditions remain unchanged, the upward trend in the labor force participation rate among the elderly will gradually slow. The rate is expected to continue rising, especially for elderly women, with improved health and education. However, the sluggishness of labor force participation of men under 65, influenced by technological progress, may hinder further growth of the elderly LFPR.

Growth in the number of employed persons over the next five years is estimated to be 70,000 to 140,000 per year, lower than the 2010-2019 average of 344,000. Even in the case with employment expansion policies for the elderly, women, and foreign workers, the increase would average 250,000 to 300,000 per year for the next five years.

To address weakening of potential growth due to aging, policies should focus on improving both quantitative and qualitative aspects of labor supply, including productivity. Tailored employment policies considering gender and education level are necessary for the elderly. Developing statistical indicators to accurately assess the labor market situation is crucial, considering the proportion of the elderly working primarily in non-cyclical occupations.

Keywords: Employment, Elderly Labor, LFPR, Labor Supply, Cohort Simulation

JEL Classification: J14, J21, J26