• Journal of Labour Economics
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• v.43 no.4
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• pp.1-34
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• 2020

After the global financial crisis, doubts have been raised about the usefulness of traditional unemployment rate for the labor market slackness, hence, this study provides alternative indicators that can help estimate the labor market slackness in Korea, and investigates the degree of biasness of traditional indices of Korean labor market. In particular, this study intends to focus on the possibility of employing the labor underutilization index officially announced by Statistics Korea (KOSIS) from 2015. To do this, we first define the labor underutilization indices from 2003 to 2014 by applying current definitions of labor underutilization indices retrospectively to these periods. Based on these indices, the empirical analysis shows that the employment gap using labor underutilization indices is highly correlated with total output gap, and has significantly improved the performance of forecasting inflation rate compared to other labor market slackness indicators.