South Korea

Korea Institute for International Economic Policy | English | AcademicThink | Jan. 23, 2026 | UndeterminedEmployment

South Korea is experiencing rapid demographic decline due to ultra-low fertility and accelerated aging, with its population projected to fall below 40 million by 2065. This demographic shift is intensifying labor market imbalances, with labor shortages expected to grow significantly across various sectors such as ICT services, healthcare, logistics, hospitality, and agriculture. Geopolitical tensions and technological advancements have further exacerbated these shortages, especially in high-tech industries. As a result, attracting foreign labor, both skilled and unskilled, is increasingly considered essential to alleviate workforce gaps, although challenges related to immigration policy rigidity and social consequences remain.

Empirical analysis of the European Union’s free labor movement regime revealed that increasing the share of immigrants reduces labor market tightness, with a 1 percentage point rise in immigrant share leading to a 10% decrease in labor market tightness. Low-skilled immigrants contributed to short-term employment increases, while high-skilled immigrants supported long-term growth in services. Some short-term adverse effects, including increased unemployment among low-skilled natives, were also observed. A parallel analysis of Korea’s expanded Employment Permit System (EPS), which increased foreign labor especially post-COVID, showed a reduction in labor shortages with a lag of about one year. However, no improvements in labor productivity were detected, indicating a need for policy adjustments such as allowing longer-term stays for foreign workers.

Policy recommendations include refining labor shortage assessments with more detailed, sector-specific data and improving immigration data integration for better policy analysis. Visa frameworks should be simplified into tier-based categories to enhance flexibility and support longer-term labor participation with pathways to settlement. Enhanced job matching through digital platforms and AI tools, along with stronger governance to prevent unfair practices, is advised. Finally, strengthening stay management and training systems for foreign workers—through digitalized monitoring, language instruction, vocational education, and workplace safety training—is recommended to improve productivity and workplace integration.

Yonhap | English | News | Jan. 23, 2026 | North Korea

A joint team of South Korean police and military investigators raided the homes and offices of three civilian suspects on January 21, 2026, in connection with alleged drone flights into North Korea. The suspects are accused of violating the Aviation Safety Act, and the raids were conducted as part of an ongoing investigation following North Korean claims that South Korea infringed on its sovereignty with drone incursions in September 2025 and January 4, 2026. South Korea's military has denied involvement, stating it does not operate the drone models implicated.

One of the suspects, a graduate student surnamed Oh in his 30s, publicly claimed responsibility for flying the drones in a recent interview. Along with another suspect, also a civilian, Oh attended the same university in Seoul, worked at the presidential office under former President Yoon Suk Yeol, and co-founded a drone manufacturing startup supported by their university in 2024. Oh also operated two online news outlets focused on North Korea, which were shut down amid accusations that they served as fronts for covert military intelligence operations.

During the raids, investigators searched the university-affiliated drone startup but did not search the news outlets' offices. The two suspects reportedly manufactured the drones in an engineering lab at their university, and investigators were seen removing an unidentified object from the lab. This follows North Korea's earlier claims, supported by a January 2026 photo from its Korean Central News Agency, that it had intercepted and disabled a South Korean drone near the border city of Kaesong in September 2025.

Yonhap | English | News | Jan. 23, 2026 | Shifting Geopolitical Alliances

Victor Cha, a U.S. expert and president of the Geopolitics and Foreign Policy Department at CSIS, proposed the creation of a "collective economic deterrence" pact involving South Korea, the United States, Japan, and other countries to counter China's economic pressure. This proposal comes amid concerns of possible Chinese retaliation toward South Korea following its nuclear-powered submarine project, which the U.S. has approved. The pact aims to collectively respond to any economic coercion by China, similar to the collective security principle of NATO’s Article 5, thereby deterring Chinese economic aggression rather than initiating a trade war.

Cha described China as an unreliable partner for South Korea, accusing Beijing of failing to curb North Korea's nuclear activities and ignoring UN sanctions. He emphasized that no single country in the region can effectively counter China alone, but collectively the countries possess enough leverage. The pact would treat coercion against one member as coercion against all, triggering automatic retaliation, which could impose real costs on Beijing and make it reconsider its pressure tactics.

South Korean President Lee Jae Myung has sought balanced relations with both China and the U.S., exemplified by his recent summit with Chinese President Xi Jinping. However, Cha believes this amicable approach is unlikely to withstand the fallout from the submarine deal, as China has historically retaliated against South Korea economically in response to geopolitical disputes. He called for stronger trilateral cooperation between South Korea, the U.S., and Japan, highlighting their substantial trade with China and leverage over key Chinese imports worth over $23 billion.

Cha urged the Trump administration, which holds the G7 presidency in 2027, to lead efforts in forming this economic deterrence pact and to avoid measures like tariffs on allies. He recommended that Trump explicitly oppose China's economic pressure tactics during his upcoming visit to Beijing in April to deter further coercion against allies, particularly South Korea, following the submarine project agreement.