"South Korea's Manufacturing Workforce Ages Faster Than US and Japan... Proportion of Over 50s Twice as High"

[Asia Economy Reporter Jeong Hyunjin] Concerns have been raised that the growth potential of Korea's manufacturing industry will rapidly deteriorate as the manufacturing workforce in Korea has aged faster than in major manufacturing powerhouses such as the United States and Japan over the past decade.

On the 23rd, the Korea Economic Research Institute under the Federation of Korean Industries announced that an analysis of the 'Aging Trend of Manufacturing Workers' from 2010 to 2020 showed that the proportion of manufacturing workers aged 50 and over increased by 14.4 percentage points, from 15.7% in 2010 to 30.1% last year. During the same period, the proportion of workers in their 30s decreased by 7.3 percentage points, youth workers (aged 15-29) by 6.4 percentage points, and those in their 40s by 0.8 percentage points.

(Data provided by Korea Economic Research Institute)

The Korea Economic Research Institute pointed out, "While the proportion of elderly manufacturing workers aged 50 and over has nearly doubled in the past 10 years, the proportion of youth and middle-aged workers, who are the future growth engines, has all decreased, indicating a serious level of aging in the manufacturing workforce."

Comparing with major manufacturing countries such as the United States and Japan, the average age of manufacturing workers in Korea rose by 3.3 years from 39.2 in 2011 to 42.5 last year, whereas in Japan it increased by 1.2 years from 41.6 to 42.8, and in the United States by only 0.3 years from 44.1 to 44.4. The annual average growth rate of the average age of manufacturing workers during this period was 0.90% in Korea, which was 11.3 times higher than the United States and 2.8 times higher than Japan.

Currently, the average age of manufacturing workers in the United States and Japan is still higher than in Korea, but the rate of increase is faster in Korea. The Korea Economic Research Institute forecasted, "If this trend continues, from 2026, the average age of manufacturing workers in Korea (44.9 years) will surpass both the United States (44.6 years) and Japan (43.6 years)."

The Korea Economic Research Institute identified low birth rates leading to population aging and various corporate regulations as causes of manufacturing workforce aging. In particular, it analyzed that strict labor regulations have overprotected existing regular workers, suppressed investment and employment in manufacturing, and made it difficult for youth and middle-aged workers to enter the labor market. While manufacturing jobs increased by 597,000 between 2010 and 2015, they only increased by 71,000 between 2015 and 2020, indicating a significant contraction in manufacturing employment over the past five years, the institute added.

(Data provided by Korea Economic Research Institute)

Looking at wage trends by age group of manufacturing workers over the past 10 years, the wage growth rate of workers aged 50 and over was higher than that of youth and middle-aged workers. The average monthly wage of workers aged 50 and over increased from 2,607,000 KRW in 2010 to 4,096,000 KRW last year, an average annual increase of 4.6%. During the same period, youth workers (aged 15-29) saw an average annual increase of 3.6%, workers in their 40s 3.3%, and those in their 30s 2.5%, which were relatively lower than the elderly group. The Korea Economic Research Institute argued, "As the industrial workforce ages, labor productivity is expected to decline while corporate labor costs will increase, which could rapidly dampen the vitality of the manufacturing industry, a key sector."

The institute cited the seniority-based wage system as the reason why wages for the elderly rise faster than for youth and middle-aged workers. As of last year, among workplaces with 100 or more employees, more than half (54.9%) had adopted a seniority-based wage system. This was higher than the adoption rates of job-based pay (35.9%), which mainly reflects job value such as importance and difficulty, and competency-based pay (27.1%), which considers skill improvements such as qualification acquisition and training completion.

Choo Kwang-ho, Director of Economic Policy at the Korea Economic Research Institute, said, "Reforming the wage system to reflect job value and productivity, enhancing labor flexibility, easing regulations to reduce the private sector's employment burden, and simultaneously strengthening education and training to improve labor quality should be supported."

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