South Korea can boost its potential economic growth by employing more women in the workforce, a report said Tuesday, urging lawmakers to come up with relative measures for the country where female labor participation is among the lowest in developed nations.

"Underemployment in some segments of the (Korean) population is an important labor market challenge and a factor contributing to lower potential growth," the report jointly written by the International Monetary Fund and the Bank of Korea said.

"The benefits of comprehensive policy reforms aimed at increasing labor force participation... are likely to be considerable in the medium term," the report said. 

Asia's fourth-largest economy, despite its relatively low unemployment rate as a whole, still faces challenges regarding its female labor participation rate, which stood at 55.2 percent in 2012.

The figure is 7.1 percentage points lower than the average for members of the Organization for Economic Cooperation and Development.

The labor force participation rate refers to the percentage of those who take part in the workforce by either having a job or actively seeking one.

Pointing out the wide gap between male and female labor participation rates in South Korea, the report advised that reform measures helping to remove barriers against working women can reduce the gender difference by nearly one-third.

Women's labor force participation rate came to 52.3 percent in June, 22.1 percentage points lower than that of men in South Korea, according to Statistics Korea.

"Removing market distortions that inhibit female participation can lead to a higher level of aggregate income and welfare," the report said.

Among some of the measures to help close the gender gap, the report suggested policy actions for better childcare benefits and alleviating tax burdens on part-time workers, as well as second earners within a household.

Second earners in South Korea who make more than 1 million won $968.34) per year are not eligible for income tax deductions, resulting in higher taxes for double-income families even if their combined income is the same as single-income households.

"Removing policy distortions that prevent female participation is a key to fostering growth and reducing inequality," said the report.

South Korea's growth rate has been below 4 percent since 2011, with the country facing a grim outlook that its economy might be slipping into a protracted period of low growth amid toughening situations at home and abroad.

Accordingly, the government has been trying to bring more women into the nation's workforce by encouraging companies to offer flexible hours and other incentives to help those who need to juggle home life and work. (Yonhap)