Why South Korea Is Running Out of Young Workers Faster Than Any Other OECD Country

 South Korea built one of the world’s most successful economies with a remarkably large, educated and disciplined workforce.

That workforce is now beginning to shrink.

The country’s working-age population aged 15 to 64 declined from approximately 36.64 million in 2020 to 35.62 million in 2024. This means South Korea lost more than one million working-age residents in just four years.

The decline is only beginning.

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OECD projections indicate that South Korea could experience the largest reduction in its working-age population among member countries over the coming decades. The population aged 20 to 64 is projected to fall by approximately 49%, while the OECD average decline is expected to be far smaller.

This demographic transformation is often explained with one familiar statistic: South Korea has one of the world’s lowest fertility rates.

But the labor problem is more complicated than simply having fewer babies.

South Korea is simultaneously experiencing five structural changes:

• Fewer young people are entering the labor market.
• Many highly educated graduates delay entering full-time employment.
• Small and medium-sized companies struggle to attract workers.
• The population is heavily concentrated in the Seoul metropolitan region.
• Older employees are often pushed out of career jobs before the country can afford to lose their experience.

The result is a paradox.

South Korea can experience youth employment difficulties and severe labor shortages at the same time.

Understanding that contradiction is essential to understanding the country’s economic future.

South Korea’s Demographic Decline Is Moving Faster Than Expected

Population decline is affecting many developed economies.

Japan, Italy, Germany and several countries in Eastern Europe are also becoming older. Across the OECD, the working-age population aged 20 to 64 is projected to decline by approximately 8% between 2023 and 2060. In more than a quarter of OECD countries, it could fall by more than 30%.

South Korea stands out because the transition is occurring with extraordinary speed.

Japan’s aging problem developed gradually over several decades. Its working-age population peaked in the 1990s and had declined by about 16% by 2024. It is projected to fall by another 31% between 2023 and 2060.

South Korea has had much less time to adjust.

Its rapid economic development compressed several generations of social change into a relatively short period. Urbanization, higher education, female labor-force participation, expensive housing and changing expectations about marriage all advanced rapidly.

Fertility then fell faster than the country’s institutions could adapt.

According to the OECD, South Korea’s old-age dependency ratio is projected to increase faster than that of any other OECD country. This means that a shrinking group of workers will be expected to support a rapidly expanding retired population.

The IMF estimates that population aging could shrink South Korea’s labor force by more than one-quarter by 2050. Without substantial reforms, this could reduce annual potential economic growth by an average of around 0.67 percentage points.

The problem is therefore not limited to the distant future.

The workers who would have entered factories, hospitals, construction sites and offices in the 2040s have already—or have not—been born.

Fewer Young People Does Not Automatically Mean Easier Employment

It might seem logical that a smaller young population would create better employment opportunities.

If fewer graduates are competing for jobs, wages should rise and companies should compete to recruit them.

That is happening in some industries, but not across the entire economy.

South Korea’s labor market is sharply divided between highly desirable and less desirable jobs.

Large conglomerates, public institutions and established professional employers generally offer higher salaries, stronger job security, better benefits and greater social status.

Small and medium-sized enterprises often struggle to offer the same conditions.

Many young Koreans therefore spend years preparing for a narrow group of highly competitive positions. They may study for public-service examinations, earn additional certifications, improve English test scores or repeatedly apply to major corporations.

At the same time, manufacturers, farms, construction companies, restaurants and regional businesses report difficulty finding employees.

This is not simply a shortage of people.

It is a mismatch between the jobs available and the jobs that young people consider acceptable.

The OECD has identified this gap between education and labor-market demand as a central weakness in South Korea’s youth employment system. Highly educated young people compete intensely for attractive careers, while other employers struggle to replace retiring workers.

The Ministry of Employment and Labor has similarly identified weak demand for younger workers, skill mismatches and delayed labor-market entry among people in their late twenties as continuing employment challenges.

South Korea can therefore have too few young workers overall while still leaving many young adults outside stable employment.

The World’s Most Educated Young Generation Is Underused

South Korea has invested enormously in education.

Approximately 71% of Koreans aged 25 to 34 have completed tertiary education, the highest proportion among OECD countries. The OECD average is about 48%.

Yet higher education does not always lead to a smooth transition into employment.

The employment rate among tertiary-educated young adults in South Korea is approximately 80%, compared with an OECD average of 87%. The unemployment rate for this group is relatively low, but a significant share is economically inactive—neither employed nor actively looking for work.

This reveals one of the most important contradictions in the Korean economy.

The country is not merely running out of young people.

It is also failing to use some of the young people it still has.

The education system has been highly successful at producing university graduates, but the economy has not created enough high-quality positions that match their expectations and qualifications.

This can produce several costly outcomes.

Graduates delay beginning their careers.

Employers complain that applicants lack practical skills.

Young workers avoid small firms because they fear lower wages and limited career mobility.

Companies hesitate to invest in inexperienced employees who may leave quickly for a larger employer.

The longer this transition takes, the fewer years each worker contributes to the labor market.

In a country with abundant young people, delayed entry may be inefficient.

In a country facing a demographic emergency, it becomes a national economic risk.

Seoul Is Absorbing the Young Workers the Rest of the Country Needs

South Korea’s labor shortage is also geographically uneven.

Young people continue to move toward Seoul, Incheon and Gyeonggi Province because the metropolitan region contains a disproportionate share of the country’s universities, corporate headquarters, cultural institutions and high-paying jobs.

Seoul and several major urban centers continue to attract younger residents, while rural and regional communities face population decline, labor shortages and weakening local economies.

This creates two different demographic realities.

The Seoul metropolitan region struggles with expensive housing, long commutes, intense competition and overcrowded infrastructure.

Many provincial areas struggle to maintain schools, hospitals, shops, farms and industrial facilities because their younger populations have disappeared.

A regional company may technically operate in a country with millions of unemployed or underemployed people, but that does not mean those workers are willing or able to relocate.

Housing, childcare, education, transportation and career opportunities all influence where people choose to live.

Regional labor shortages therefore cannot be solved by simply posting more vacancies.

Companies and local governments must make regional life economically and socially viable.

Without that change, South Korea may continue concentrating its shrinking young workforce in one metropolitan area while the rest of the country ages even faster.

Small Businesses Will Feel the Shortage First

Large corporations are usually better equipped to manage demographic change.

They can raise salaries, automate production, recruit foreign specialists or move some operations overseas.

Small businesses have fewer options.

A regional manufacturer may depend on a limited number of technicians who understand specific machines. A farm may require seasonal labor during a narrow period. A nursing facility needs workers who can provide physically and emotionally demanding care. Restaurants, logistics companies and construction firms often need employees to work irregular hours.

As the number of young workers falls, these businesses must compete for a smaller labor pool.

Some will increase wages.

Some will employ more foreign workers.

Some will automate.

Others will reduce production or close.

This matters because small and medium-sized enterprises remain a major source of employment in South Korea.

A labor shortage that begins in less attractive industries can eventually spread through the wider economy.

When suppliers cannot hire workers, large manufacturers may face delays.

When care facilities lack staff, families may reduce their own working hours to look after elderly relatives.

When farms cannot recruit seasonal labor, food production becomes more expensive.

A demographic shortage is therefore transmitted through supply chains and households, not only through headline employment figures.

An Older Population Will Need More Workers, Not Fewer

Population aging affects both the supply of labor and the demand for it.

As the number of older residents increases, South Korea will need more nurses, care workers, doctors, physical therapists, drivers and social-service employees.

However, the population available to perform those jobs will be shrinking.

This is especially difficult because many care-related positions are physically demanding and relatively low paid.

The OECD has warned that the combined cost of healthcare, long-term care and pensions could more than double to approximately 17.4% of South Korea’s gross domestic product by 2060.

A smaller workforce will therefore be asked to finance and provide more age-related services.

The issue is not simply how many elderly people receive pensions.

It is also who will operate hospitals, deliver meals, maintain homes and provide daily care.

Technology may support some of those services, but elderly care cannot be completely automated.

Human labor will remain essential.

Can Older Koreans Remain in the Workforce Longer?

One response is to extend working lives.

South Korea already has many economically active older adults, but their employment often changes dramatically after they leave their primary careers.

Many workers retire from stable positions in their fifties and later return to the labor market in lower-paid, less secure jobs.

This system wastes experience.

A skilled engineer, manager or public employee may leave a career position while still capable of contributing productively for many more years.

Extending employment cannot simply mean giving older people more low-wage temporary jobs.

South Korea will need systems that allow workers to update their skills, change roles gradually and remain productive without blocking opportunities for younger employees.

Health also matters.

IMF research suggests that improvements in health have meaningfully increased labor-force participation among older Koreans. Better health raises the probability that older people will continue working and can delay retirement.

Policies supporting preventive healthcare, retraining and flexible work could therefore become part of South Korea’s labor strategy.

The objective should not be to force people to work indefinitely.

It should be to remove systems that push capable workers out prematurely.

South Korea Cannot Solve the Problem Without Women

South Korea has made substantial progress in female education and employment, but women still face large career penalties after marriage and childbirth.

The OECD identifies the high opportunity cost of having children—particularly the career cost imposed on mothers—as one of the central causes of South Korea’s ultra-low fertility.

This creates a double loss.

Some women reduce their working hours or leave employment after becoming mothers, weakening the current labor supply.

Other women delay or avoid having children because they fear the effect on their careers, weakening the future labor supply.

Childcare subsidies alone cannot completely solve this problem.

Workplace culture, promotion systems, working hours, housing costs and unequal household responsibilities also influence family decisions.

South Korea cannot afford to treat women’s participation as a secondary social issue.

It is a central economic issue.

A society with fewer young workers must make better use of every qualified person it already has.

Immigration Is Becoming an Economic Necessity

South Korea has increasingly relied on foreign workers in manufacturing, agriculture, construction, shipbuilding and services.

In 2025, the country set an admission quota of 130,000 workers under the E-9 employment permit system. More than 70,000 positions were allocated to manufacturing, with additional quotas for agriculture, fisheries, construction and services.

The need for foreign labor is likely to grow.

However, immigration policy cannot be limited to filling vacancies that Korean workers avoid.

If migrants are expected to become a permanent part of the labor force, South Korea will need stronger systems for language education, housing, family integration, workplace protection and long-term residency.

A revolving door of temporary workers may relieve short-term shortages but will not fully solve long-term demographic decline.

South Korea must eventually decide whether it views foreign workers as temporary labor inputs or as potential members of Korean society.

That decision will become more urgent as regional factories, farms and care facilities compete for workers.

Other aging countries will also be trying to attract migrants.

South Korea will not be able to assume that foreign labor will always be available on favorable terms.

Can Artificial Intelligence Replace the Missing Workers?

South Korea is one of the world’s most technologically advanced economies.

It has major strengths in semiconductors, robotics, electronics, telecommunications and industrial automation.

That gives the country an important advantage.

AI and automation could allow fewer employees to produce more goods and services.

The IMF estimates that approximately half of jobs in South Korea are exposed to artificial intelligence. It also argues that AI adoption could help offset some of the economic effects of an aging and shrinking workforce.

Factories can use robots to perform repetitive or dangerous work.

Hospitals can use AI to assist with diagnosis and administration.

Local governments can automate routine services.

Small companies can use digital tools for marketing, translation, customer support and accounting.

But automation is not a complete substitute for people.

Robots require investment, maintenance and skilled operators.

Small firms may struggle to afford advanced systems.

AI can improve the productivity of nurses and care workers, but it cannot completely replace human interaction.

Technology may also widen inequality between highly productive companies and businesses that cannot modernize.

The most realistic strategy is therefore not to replace workers with machines.

It is to use machines to make each worker more productive.

Why Higher Fertility Cannot Fix the Immediate Shortage

South Korea has introduced numerous policies designed to encourage childbirth.

Those efforts may be necessary, but they cannot solve the labor shortage developing now.

A child born in 2026 will not enter full-time employment for roughly two decades.

Even a dramatic fertility recovery would therefore have little effect on labor supply during the 2030s.

South Korea needs two demographic strategies at the same time.

The long-term strategy must make marriage and parenthood more compatible with stable housing, secure employment and career development.

The immediate strategy must increase the effective labor supply by:

• helping young adults enter careers earlier;
• improving job quality at smaller companies;
• supporting women’s continuous employment;
• retaining capable older workers;
• attracting and integrating foreign workers;
• reducing regional inequality;
• and investing in productivity-enhancing technology.

No single policy will be sufficient.

What South Korea’s Labor Market May Look Like in 2040

By 2040, labor shortages could change the Korean economy in ways that are difficult to imagine today.

Wages may rise in occupations that were previously undervalued.

Companies may become more willing to hire older employees.

Four-day workweeks may be difficult to implement in sectors that cannot recruit enough staff, even as AI makes shorter schedules possible elsewhere.

Universities may close or merge as student numbers decline.

Regional governments may compete aggressively for workers and families.

Immigration may become a permanent feature of national economic policy.

Businesses that fail to automate may disappear, while highly productive companies expand with smaller workforces.

Young workers may gain greater bargaining power—but only if the labor market mismatch is reduced.

Otherwise, South Korea could continue experiencing the strange combination of unfilled vacancies and frustrated job seekers.

South Korea Is Not Simply Running Out of People

The most important lesson is that South Korea’s labor crisis is not only about population size.

It is about how the country organizes education, careers, families, immigration, housing and regional development.

South Korea still has enormous strengths.

Its population is highly educated.

Its digital infrastructure is advanced.

Its companies are competitive in several critical global industries.

Its older population is becoming healthier.

Its society has repeatedly demonstrated an ability to adapt rapidly to economic change.

But demographic adaptation will require more than another temporary subsidy program.

The country must redesign institutions that were built for an era when workers were plentiful, careers were relatively predictable and population growth seemed permanent.

That era is ending.

The OECD’s projections suggest that no member country may experience a larger long-term contraction in its working-age population than South Korea.

The country’s economic future will therefore depend not only on how many workers remain.

It will depend on whether South Korea can use their abilities more effectively.

South Korea cannot manufacture millions of new young workers overnight.

But it can build a labor market in which fewer people are excluded, delayed, underused or forced to leave productive careers too early.

That may determine whether demographic decline becomes an economic disaster—or the force that pushes South Korea toward a more productive and inclusive economy.