Night view of the Han River in Seoul (Yonhap)
SEOUL, August 6 (Korea Bizwire) – A new study by South Korea’s National Pension Research Institute has challenged a widely held assumption that the country’s economic and labor trends will eventually converge with those of advanced economies like the United States and Japan.
In a report titled “A Study on the Convergence of Demographic and Economic Variables,” released this week, researchers found little statistical evidence that key indicators—such as labor productivity, total factor productivity, and gender- and age-specific labor force participation rates—are aligning with the trajectories of G7 or OECD nations.
The convergence hypothesis, which holds that lower-income countries grow faster than wealthier ones and eventually reach similar levels of productivity and development, has long underpinned government modeling, including projections for national pension funding. But the new study calls into question the suitability of this framework for South Korea.
Although Korea’s labor productivity has increased substantially in recent decades—surpassing Japan in some measures—the report warns that this progress may reflect a “statistical mirage.”
More rigorous time-series analysis suggests that convergence with G7 or OECD productivity levels is not occurring in any sustained or predictable manner. The pace of productivity gains is also slowing, researchers said, due to GDP growth lagging behind employment growth.
Seoul’s business district (Image courtesy of Pixabay)
The report’s most striking findings concern labor force participation. Unlike the gradual and broad-based gains seen in countries like Japan, South Korea’s rising participation rate is driven almost entirely by increased female employment, while male participation has declined slightly.
The country’s distinctive M-shaped female employment curve—reflecting exit and reentry due to marriage and child-rearing—remains pronounced, unlike in Japan, where it is flattening.
Moreover, South Korea has the highest labor participation rate among those aged 70 and older in the OECD, underscoring a unique employment dynamic among its elderly population.
Statistical analysis found little evidence to support the notion that Korea’s gender- and age-specific employment trends are on track to resemble those of the U.S. or Japan.
“These findings raise serious concerns about using foreign models as a foundation for long-term domestic economic forecasting,” the report said. “Such projections may underestimate future risks and lead to flawed policymaking.”
With President Lee Jae-myung’s administration under pressure to address the sustainability of the country’s welfare systems, the report recommends building cautious, data-driven projection models rooted in Korea’s unique demographic and economic context.
M. H. Lee (mhlee@koreabizwire.com)
