Skills and Labor Market Performance in Korea: An International Comparison Perspective

This study presents an international comparison of relations between skills and labor market performance. Human capital theory emphasizes that skills have a positive effect on labor market performance, which is evident in most countries. However, skill levels do not have a positive impact on employability and wage in South Korea, unlike other OECD countries. Using data from the Programme for the International Assessment of Adult Competencies (PIAAC), we analyze how various skill dimensions influence employment outcomes and wage levels. The skills measured in PIAAC are plausible values. Therefore, our methodology entails estimating regression coefficients and presenting the final estimates as the averages of these coefficients. Standard errors are computed through repeated sampling using the jackknife technique. The findings of this study indicate that policies focusing solely on the supply side of skills, such as expanding education and training, may have a limited impact on improving employment and wages in Korean labor market. While human capital investment remains crucial for labor market outcomes, the results suggest that Korea could achieve greater effectiveness by complementing these efforts with workplace innovation policies aimed at increasing the demand for skills.