Too few college-educated women participate in South Korea’s workforce, a factor that is likely to affect the country’s prospects for long-term economic growth. Educated women must therefore play a larger role if South Korea is to become one of the world’s most economically advanced nations.

That goal may be a stretch. South Korea already belongs to the Organisation for Economic Co-operation and Development (OECD). But a McKinsey study has found that if the country is to become one of the OECD’s top ten members (ranked by gross domestic product per head) as of 2010, its GDP per capita (purchasing-power-parity basis) would have to grow by 6.1 percent annually.¹ Such high growth would generate 3 million new jobs, at least 1.2 million of them for professionals. But as things stand today, South Korea wouldn’t be able to fill those jobs only with men, since more than 90 percent of its college-educated men already participate in the labor force.

Although nearly half of today’s college graduates in South Korea are women, only 54 percent of its female college graduates participate in the labor force—the lowest such rate of any member of the OECD. By contrast, the corresponding rate for South Korean men nearly matches the rates for men in Sweden and the United States (Exhibit 1).

The McKinsey study identified ten obstacles for women in the South Korean workforce, including discriminatory hiring policies, ineffective legislation on working women’s rights, and social prejudice. It recommended several remedies, from launching equal-opportunity programs to reinforcing employment-discrimination laws to using the mass media for a campaign against sex bias. The way to get women into the workforce, the study found, was to relieve them of the burden of childcare, which the respondents to a 1998 survey of nearly 40,000 South Korean women perceived as the biggest obstacle to employment—more serious than prejudice. Their perception is grounded in reality: the labor force participation rate is particularly low for women in their mid-20s and early 30s.

This so-called M-curve contrasts with the reverse U-curve of countries such as Canada and Sweden (Exhibit 2). In practice, it means that women leave the workforce during their peak learning years because there is no one to take care of their children. This phenomenon gives rise to discriminatory human-resources policies—companies don’t think it worthwhile to invest in the careers of women who are destined to leave the workforce—and those policies are responsible for the concentration of women in lower-status jobs and for career ceilings.

South Korea isn’t the only Asian country that fails to make full use of its highly educated women. In Japan, 98 percent of college-educated men participate in the labor force, compared with only 68 percent of college-educated women; in the Philippines, those figures are 83 and 47 percent, respectively. In some parts of Asia (including Hong Kong, Japan, and Singapore) women also leave the workforce temporarily in their mid-20s and early 30s—or even permanently when they marry or give birth (Exhibit 3).

In South Korea, childcare problems manifest themselves in two ways: inadequate maternity benefits and poor day-care options. Maternity leaves will probably be raised to 90 days in November, from 60 days—a very large step for South Korea. But though the cost of the additional 30 days will be borne by employment insurance, employers will still have to bear most of the cost of this benefit, and that is yet another disincentive to hiring women.

The lack of adequate day care is just as problematic. Although working women in South Korea have about 2,000,000 children under the age of six, only 640,000 of them can be accommodated in existing day-care operations. Many of these facilities are small, and standards for the qualifications, pay, training, and working conditions of day-care teachers are much lower than those of kindergarten teachers. The government provides support for only the lowest-income families.

Lightening the childcare burden will be hard in the short term, but the situation could be improved. The pending maternity leave reform, for example, should include cost breaks for employers, not just an increase in the number of days of maternity leave. The government could also improve matters by enforcing the existing maternity leave laws and increasing penalties for employers that ignore them. In addition, it should increase childcare opportunities for children under the age of three, where the need is greatest, and improve the quality of the facilities by introducing an accreditation system, as well as improving training programs and raising the compensation of teachers. Last, the government should gradually broaden subsidies beyond the lowest income brackets.

Companies too can help, by developing on-site childcare programs. Smaller companies could form consortia to share costs. And women’s organizations, especially, could help to minimize the setup costs of such programs by using churches, community centers, schools, and temples as day-care centers.

Carrying out these reforms would be a multibillion-dollar undertaking, so the study recommended a ten-year or longer rollout to ease the financial burden. But the government should move now, the study noted. Some developed nations began to support childcare several decades ago, when their GDPs per head were much lower. The first step is getting the government to take childcare more seriously. A failure to act quickly will greatly inhibit the ability of South Korea to fulfill its economic potential.