Labour market reform to improve growth prospects and reduce inequality is a top priority in the face of rapid population ageing and a dualistic labour market. Sustaining output growth requires policies to mitigate the impact of rapid population ageing by increasing labour inputs from under-employed segments of the population. In particular, female labour participation should be encouraged by better work-life balance and increasing the availability of highquality, affordable childcare. More flexible employment and wage systems would increase the age at which older workers leave firms. For young people, improved vocational education at the secondary and tertiary levels would help overcome the labour mismatch and the overemphasis on tertiary education. Labour market dualism creates serious equity concerns, as non-regular workers face significantly lower wages, precarious jobs, less coverage by social security and less training. A comprehensive approach is required to break down dualism, including reduced employment protection for regular workers, alongside improved social insurance coverage and expanded training for non-regular workers. This Working Paper relates to the 2012 OECD Economic Survey of Korea (www.oecd.org/eco/surveys/Korea).