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This paper explores the causes and solutions of the problem that the official unemployment rate does not adequately represent the reality of employment situation in Korea. First, compared to ILO's international standards, there are several differences in the measurement of unemployment in Korea, for example, the treatment of unpaid family workers working less than 18 hours per week, the classification of persons who are waiting for a new job or temporarily laid-off, and the criteria of job search activities. The questionnaire structure of the Labor Force Survey in Korea also misleads the judgment of economic activity state. Comparing the responses of the basic survey to those of the supplementing survey, approximately 90% of the responses show discrepancies and this indicates the possibility of misclassification. Next, this paper suggests the extended unemployment indicators as alternative, based on the current survey. The extended unemployment indicators support the presence of significant amounts of hidden unemployment and underemployment. And, it is found that the analyses using those indicators are very useful for the investigation of many aspects of employment dynamics.
Keywords: Unemployment, Underutilization of Labor Force, ILO's International Standards of Unemployment Indicators, Extended Unemployment Indicators, Korea
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I. INTRODUCTION
The unemployment rate is the most important indicator of the deterioration of the economy as well as the employment situation. It is imperative that policymakers are sensitive to the current state or fluctuations of the unemployment rate. However, many people raise questions as to whether the unemployment rate in Korea functions well in assessing the labor market situation or accurately identifies policy standards on employment. There is also increasing attention to the gap between the officially reported unemployment rate and the reality.
Criticisms raised regarding the unemployment rate can be summarized into two parts. First is the low calculation of the unemployment level, that is, the number of people without a job. For instance, when the Korean economy plummeted due to the 2009 global financial crisis, the official employment rate did not deviate from 3 percent. In fact, Koreas level of unemployment is the lowest among OECD member states. However, Koreas employment rate (= proportion of the population employed) remains so low only because of the high proportion of the population economically inactive....