Aging Korean Manufacturing Industry... 2.9 Times Faster Aging Than Japan

[Asia Economy Reporter Dongwoo Lee] It has been revealed that the workforce structure in South Korea's manufacturing industry is rapidly aging. In particular, the aging of the manufacturing workforce is progressing faster than in Japan, which is considered the "world's oldest country," raising concerns that the growth potential of the Korean economy could rapidly decline.

The Korea Economic Research Institute (KERI) announced on the 15th that, comparing the aging trends in the manufacturing industries of South Korea and Japan over the past 20 years (1999?2019), the average age of manufacturing workers in South Korea increased by 6.6 years from 35.5 in 1999 to 42.1 in 2019, whereas in Japan it rose by 2.3 years from 40.4 to 42.7. This means that South Korea's manufacturing workforce is aging 2.9 times faster than Japan's in terms of the increase.

In 1999, South Korea's manufacturing workers were 4.9 years younger than Japan's, but by 2019 the gap had narrowed to 0.6 years. KERI predicted that, given the pace over the past 20 years, South Korea's manufacturing workforce will become older than Japan's starting from 2022.

Looking at the age distribution of manufacturing workers in both countries, South Korea's youth segment (ages 15?29) dropped sharply from 32.0% in 1999 to 16.0% in 2019, effectively halving. The core economic age groups in their 30s and 40s saw a combined decrease of 2.7 percentage points, with the 30s decreasing by 6.3 points and the 40s increasing by 3.6 points. Conversely, the proportions of workers in their 50s and 60s increased significantly: the 50s rose from a single-digit 8.4% to 22.4%, a 14.0-point increase, and those aged 60 and above increased from 1.7% to 6.4%, a 4.7-point rise.

In Japan, the youth segment (15?29) also declined but by a smaller margin (6.4 percentage points) compared to South Korea's 16.0 points. Among the core economic groups, the 30s decreased by 1.2 points, while the 40s increased by 3.7 points, resulting in a total increase of 2.5 points. Unlike South Korea, where both the 50s and 60s age groups increased, Japan's 50s decreased by 1.5 points from 23.9% to 22.4%, while the 60s increased by 5.4 points from 3.0% to 8.4%.

Regarding wage trends by age group in South Korea and Japan, South Korea showed a generally faster wage increase compared to Japan, especially with higher wage growth rates among older age groups than younger ones. This indicates that the rapid aging of the workforce structure could significantly increase labor cost burdens for Korean companies.

Comparing wages in South Korea from 1999 to 2019, wages more than doubled across all age groups. The 50s age group saw the highest increase at 3.14 times, followed by those aged 60 and above at 2.77 times, ranking third after the 40s at 2.88 times. In contrast, the youth group (15?29) increased by 2.72 times, and the 30s by 2.48 times, showing relatively slower wage growth among younger workers.

In Japan, wage changes were generally minimal. Wages for the 30s and 60+ age groups decreased to 0.97 and 0.98 times their 1999 levels, respectively, while wages for the 40s remained unchanged. Only the youth (1.18 times) and 50s (1.07 times) age groups saw slight wage increases.

KERI explained that the faster wage increase among older age groups in South Korea is due to the seniority-based wage system. In South Korea, workplaces adopting the step-based wage system, where wages are determined by tenure and age (61.8%), outnumber those using job difficulty or skill-based wage systems (38.7%) or competency-based systems (29.5%).

Choo Kwang-ho, Director of Economic Policy at KERI, expressed concern, stating, “The rapid aging of the manufacturing industry, a key sector, leads to a decline in productivity and potential growth rates. Considering South Korea's seniority-based wage system and labor market rigidity, this will increase labor cost burdens for companies and reduce their capacity for new hiring.” He added, “It is necessary to support workforce upskilling, reform the wage system toward performance and job-based pay, and promote labor market flexibility.”

This content was produced with the assistance of AI translation services.