Martial Arts: "Digital Transformation Needed to Address 'Declining Working-Age Population'"

The Korea International Trade Association's Institute for International Trade and Commerce argued on the 9th in its report titled "Measures to Enhance Corporate Productivity in Response to the Decline in the Working-Age Population" that the decline in the working-age population must be addressed through digital transformation.

Trends in South Korea's Working-Age Population and Changes in Age-Specific Population Structure. Photo by Korea International Trade Association Report

The report identified four main reasons behind the slowdown in South Korea's productivity growth rate: low levels of digital transformation among companies, widening productivity gaps between large and small-to-medium enterprises, increasing productivity disparities between manufacturing and service sectors, and a rigid labor market.

According to the report, there is a time lag between technological innovation being applied in actual industries and resulting in productivity gains. Considering this, active government support for technology development and diffusion is necessary.

The KITA analysis showed that companies with higher levels of digital transformation tend to have higher export amounts. It viewed the spread of digital transformation as helpful in enhancing corporate competitiveness.

The report also pointed out that the productivity gap between large and small-to-medium enterprises in South Korea is among the highest in the Organisation for Economic Co-operation and Development (OECD). As digital technologies spread, smaller companies are expected to lack the capacity to adopt these technologies, further deepening productivity disparities among firms. Therefore, to reduce productivity gaps, the report recommended streamlining government support programs for companies and strengthening win-win cooperation between large and small-to-medium enterprises.

Regarding the productivity gap between manufacturing and service sectors, the report advocated encouraging service exports and strengthening the competitiveness of the service industry through external openness. As of 2022, South Korea's productivity gap between manufacturing and service sectors was 49.8, significantly below the OECD average of 80.2.

The rigid labor market was also identified as a factor lowering labor productivity and the country's growth potential.

The report emphasized the need to create a flexible labor market by improving uniform regulations on working hours and establishing labor-management relations that meet global standards. It also stated that as the working-age population declines, expanding multiple job holdings and changing work methods are necessary to secure production volume.

Jung Manki, Vice Chairman of the Korea International Trade Association, said, "The decline in South Korea's working-age population is a somewhat predictable future, and to overcome this, it is necessary to enhance labor market flexibility," adding, "Contrary to the original legislative intent, it is necessary to ease rigid labor regulations such as the fixed-term employment law, which rather produces more non-regular workers."

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