Female 'Employment Boom Growth' in Korea Evident... Reducing Gender Gap to US Level Could Increase Labor Supply by 1.52 Million Annually

The Bank of Korea: "Expansion of Female Labor Supply Due to Changes in Social Norms"
Labor Productivity Growth Rate Slows Down

In the post-COVID-19 pandemic economic recovery process, the phenomenon of 'job-rich growth,' characterized by a rapid increase in employment rates, has been notably prominent among women in South Korea. In particular, if the upward trend in female labor force participation rates by age group continues over the next decade and the gender gap in labor force participation narrows to the level of the United States, the labor supply is projected to increase by an average of 1.52 million people annually over the next 30 years (2023?2052).

On the 24th, the Bank of Korea stated in its report titled 'BOK Issue Note: Pandemic and Job-rich Recovery' that "due to long-term social distancing measures, workers' preferences, working conditions, and industrial structures have rapidly changed, leading to the common occurrence of job-rich growth phenomena in major advanced countries." This change is considered completely different from the past economic recovery periods when employment recovery was sluggish, resulting in a 'jobless recovery' phenomenon.

The Bank of Korea identified four main causes of the job-rich growth phenomenon after the pandemic: ▲ rapid recovery of face-to-face service industries ▲ reduction in working hours ▲ flexibilization of working conditions and changes in social norms ▲ labor hoarding.

First, although face-to-face service industries were the most severely affected by social distancing, these jobs generally require relatively low educational or technical qualifications, resulting in a low labor supply mismatch. Additionally, the average wages in face-to-face service industries are low, leading to low reservation wages (the minimum wage level workers are willing to accept), which contributed to the rapid recovery of the labor market.

Moreover, while the number of employed persons increased significantly during the pandemic recovery, working hours sharply declined due to the pandemic shock and have remained at low levels, which effectively acted as a factor increasing the number of employed persons. According to the report, labor supply can be defined as total working hours (total employed persons × average working hours per person). When working hours decrease, the number of employed persons must increase to maintain labor supply. The Bank of Korea's simulation estimates that the effect of increased employment due to reduced working hours averaged 930,000 people from the first quarter of 2020 to the second quarter of this year.

Another major change is the rapid flexibilization of working conditions and shifts in social norms during the pandemic. The utilization rate of flexible working arrangements among married women was 14.4% in 2019 before the pandemic but exceeded 20% during 2021?2022. In particular, the use of telecommuting increased more than sevenfold compared to pre-pandemic levels. Following the spread of infectious diseases, the unavoidable increase in men's childcare involvement has expanded into a culture of shared parenting between spouses, leading to changes in social norms regarding childcare responsibilities.

Oh Sam-il, head of the Employment Analysis Team at the Bank of Korea's Research Department, explained, "Compared to before the pandemic, female employment rates and labor force participation rates increased by 1.7 percentage points and 1.3 percentage points, respectively, while male employment rates rose by 0.3 percentage points and labor force participation rates declined by 0.7 percentage points. Notably, the employment rate increase among women with children was relatively greater than that among women without children."

Furthermore, companies experiencing labor shortages due to a tight labor market and increased inter-industry mismatches tended to maintain employment of existing workers, which also contributed to these changes.

However, the Bank of Korea views the expansion of the labor supply base centered on women as positive but believes that the rapid labor market recovery without smooth employment restructuring has negatively impacted labor productivity.

Deputy Director Oh added, "During the labor market recovery process, the scale of inter-industry employment restructuring significantly declined, and as relatively low-productivity workers entered the labor market, the labor productivity growth rate remained lower than before the pandemic. Generally, during economic recessions, employment shifts from low-productivity industries to high-productivity industries, and such employment restructuring drives labor productivity growth. Since the contribution of inter-industry employment restructuring was not significant, it may continue to act as a constraint on labor productivity growth in the future."

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