This paper analyses the increasing dualism in the Korean labour market and the need to encourage greater labour force participation. Although the rising proportion of non-regular workers lowers labour costs and increases employment flexibility, it has a negative impact on both equity and efficiency over the;long term. Relaxing employment protection for regular workers and increasing the coverage of the social safety net for non-regular workers would help limit the extent of dualism. Population ageing is projected to be exceptionally rapid in Korea, leading to a significant decline in the workforce by mid-century. Steps to boost the participation of women through family-friendly policies are a priority. It is also important to encourage employees to stay at firms beyond the age of 50. Making the wage system more dependent on;productivity and less on seniority and implementing a company pension system in place of the retirement allowance would help maintain the employment of older persons.;This Working Paper relates to the 2005 OECD Economic Survey of Korea;(www.oecd.org/eco/surveys/korea).