S. Korea could face severe labor shortage by 2020: BOK report

South Korea could face a severe labor shortage in the coming years unless it improves productivity in the service sector, a report by the central bank said Sunday.

The Bank of Korea (BOK) report said the country could face a shortage of up to 4.8 million workers in 2020. The minimum manpower shortage estimated by the bank for the cited period stood at 1.4 million.

To prevent such developments that can stunt economic growth, the report said policymakers must pay closer attention to service-sector productivity and do more to expand the labor pool.

The report, based on the assumption that the economy will grow by an average of 4.3 percent up till 2020, said the service sector productively is important because it is expected to hire more than 60 percent of the country's total workforce.

The bank estimated that the percentage of workers employed by the service sector will rise to 63.4 percent of the total workforce in 2020 from 56.1 percent in 2004.

The service-sector growth will be fueled by expansion in such high value-added areas as finance, telecommunication and broadcasting, it said.

The bank said, however, that the influx of many industrial workers laid off during the 1997-98 Asian financial crisis into retail, transportation and storage businesses has impaired productivity in the service sector.

The report said that at present rate, service-sector productivity will grow 2.2 percent annually in the 2006-2020 period, compared to 4.7 percent for the industrial sector.

"The result of these developments have been more people engaged in providing certain services than necessary," a bank official said.

The expected labor shortage, the expert said, will be exacerbated because of an anticipated sharp drop in the country's birthrate. South Korea has one of the lowest birthrates in the world.

In order to overcome the problem, the bank said, retraining of people in the service sector must be carried on so they can help improve productivity.

The report also recommended the maximum use of senior citizens and women to make up for the expected labor shortage.

Seoul, Oct. 8 (Yonhap News)