Why Do Workers Become Less Competent the Longer They Stay? The Paradox of Korean Employees

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[Financial News] A new analysis by a state-run research institute finds that Korean workers’ cognitive skills decline with age much faster than in other countries. Although the decline begins as early as young adulthood, the system for rewarding performance fails to keep pace, effectively locking in this downward trajectory.
In its report "Factors Behind the Decline in Workers’ Cognitive Skills and Policy Implications," published on the 14th as part of its KDI Focus series, the Korea Development Institute (KDI) analyzed that the decline in Korean workers’ cognitive skills starts at the relatively early stage of youth and proceeds much more rapidly than in major advanced economies.
According to the Programme for the International Assessment of Adult Competencies (PIAAC), an international survey of adult skills conducted roughly every 10 years by the Organisation for Economic Co-operation and Development (OECD), Korean workers aged 25 to 29 ranked sixth in numeracy and fourth in literacy among OECD member countries in the first cycle (2011–2012), placing them near the top. However, in the second cycle (2022–2023) conducted a decade later, Korea’s rankings in both numeracy and literacy slipped to eighth, roughly at the average level of the 17 OECD countries surveyed.
The gap became more pronounced at higher ages. In the first cycle, Koreans in their 40s already fell below the OECD average, and the gap widened further among those in their 50s and 60s. In the second cycle, workers in their 30s and 40s showed levels similar to the OECD average, but the decline in cognitive skills accelerated sharply from the mid-50s onward, with a steep drop observed in the 60–65 age group.
Kim Minseob, a research fellow in the Department of Public Finance and Social Policy at KDI, said, “It is natural for cognitive skills to decline with age, but the pace of decline in Korea is alarmingly fast compared with other countries.”
KDI cited a lack of time for learning and skills development, rigid organizational cultures, and inadequate human resource management systems as factors behind the decline in cognitive skills. Fundamentally, however, it argued that the core problem lies in a structure where improvements in skills do not translate into higher wages and rewards.
In fact, according to a supplementary survey of establishment labor conducted in June last year, 63% of firms either had no formal wage system or lacked clear criteria for determining pay. Based on the first PIAAC cycle, wages for Korean workers were found to rise by 2.05% for each additional year of service, a higher rate than in major OECD countries such as France (0.41%), the United States of America (0.89%), and Japan (1.03%). This indicates that length of service has a greater impact on wage determination than workers’ skills or performance.
KDI warned that this structure can fuel excessive competition over educational credentials and résumés in the early career stage, as workers focus on entering large corporations or securing regular positions, rather than accumulating skills after employment. This, it assessed, leads not only to inefficiencies at the individual level but also to a decline in labor productivity at the national level.
As a solution, the report proposed as a top priority the establishment of personnel and compensation systems that clearly define job roles and allow performance to be measured. It stressed the need to create conditions under which employees can flexibly adjust their working hours to invest in skills development while employed, and to enhance the effectiveness of training programs linked to job roles and performance.
Kim added, “Japan also maintained a strongly seniority-based wage system in the past, but since the 2000s it has shifted toward a competency-based structure by expanding rewards tied to job responsibilities and duties. Korea likewise needs to clarify compensation systems based on job roles and performance in order to strengthen workers’ motivation.”
hippo@fnnews.com Kim Chanmi Reporter