South Korea's employment and population issues

There are many challenges in the South Korean economy relating to population, employment and its
labour force. South Korea has seen its birth rate fall by another 8 per cent in 2023 and the country
has experienced a continuous fall in its birth rate over the last 60 years. In 1960 each woman in
South Korea averaged around 6 children and now it is 0.72. For a country’s population to remain
stable the birth rate needs to be 2.1. South Korea is not alone in Asia with Japan (1.34), Thailand
(1.33) and Malaysia (1.82). If this trend continues Korea’s population of 51 million will have halved to
25 million by the end of the century. [Paragraph 1]

Birth rates are falling across the developed world and this brings significant long-term challenges to
governments. At a birth rate of 0.72 South Korea’s population will age incredibly fast with 50 percent
of its population being over 65 in 50 years. This is going to create a huge financial burden for those
under 65 who are in work because so many older people are dependent on pensions, health services
and social care. [Paragraph 2]

A declining number of people of working age in South Korea has significant implications for the
labour force and labour shortages. As the number of people in the labour force declines it means the
country’s potential output could decrease in the coming years. [Paragraph 3]

Some South Korean politicians are particularly concerned with the impact of its ageing population on
the healthcare sector. Low unemployment means there are shortages of doctors, nurses and other
medical professionals. In addition, as people get older they are more likely to need medical
treatment and this has increased the demand for hospital and doctor services as well as medicine.
[Paragraph 4]

The seasonally adjusted unemployment rate in South Korea is currently relatively low and many
economists believe the country is close to full employment. Economists also believe the country’s
current level of unemployment is close to its natural rate. Some politicians have, however, expressed
concerns about underemployment (hidden unemployment) which distorts the true unemployment
figure in South Korea. [Paragraph 5]

Many people believe that South Korea’s low rate of unemployment is a positive thing because the
costs of unemployment such as the loss of welfare and the opportunity cost of unemployment are
reduced when employment levels are high. However, a low unemployment rate has problems such
as rising skill shortages and increasing labour costs. Some business people have also complained
workers are not as motivated when unemployment is low because they find it relatively easy to find
another job if they are unhappy with their current work. [Paragraph 6]

Population and employment data South Korea 2024

Number of unemployed (ILO survey) 889,674

Number of people claiming unemployment benefit 671,587

Number in the labour force 29,466,345

Underemployment of those employed (estimated) 6%

Population 51.74 million

© Alex Smith
InThinking www.thinkib.net/Economics
Questions
a. Define the term unemployment. [2]

b. Calculate South Korea’s rate of unemployment. [2]

c. (i) Using an AD/AS diagram, explain the natural rate of unemployment. [4]

(ii) State one type of unemployment that is part of the natural rate of unemployment. [1]

d. Explain two types of underemployment (hidden unemployment) in South Korea. [4]

e. Using a PPC diagram explain the impact a falling birth rate in South Korea might have on the
country’s potential output. [4]

f. Using a demand and supply diagram, explain how an ageing population in South Korea might affect
the demand for medicine. [4]

g. Explain how seasonal unemployment affects the rate of unemployment in South Korea. [4]

h. Using the text and your knowledge of Economics, evaluate the view that a low rate of
unemployment is good for South Korea. [15]

© Alex Smith
InThinking www.thinkib.net/Economics