One of the biggest problems in the Korean economy is that its labor market is not flexible by global standards.
This problem stems from, among other things, the overprotection of permanent workers, especially those at well-unionized conglomerates. This ironically results in an increase in nonpermanent workers like temporaries, part-timers, daily workers and so on.
Now, nonpermanent workers make up about one-third of all salaried workers, and they manage to earn only about 55 percent of what their counterparts with regular, permanent jobs do and ― worst of all ― have to live with a lack of job security.
So resolving the problems of nonpermanent workers needs to be a main priority in the government’s labor reform.
Officials have correctly pointed out that the problems of nonpermanent workers cannot be solved without tackling what they call the “excessive” protection of full-time, regular workers.
Because of the inflexibility of the system, employers find it difficult to fire workers, which makes them reluctant to hire more and prompts them to hire nonpermanent, part-time employees.
Workers were laid off in 1998 in the wake of the Asian foreign exchange crisis, but the current situation shows that the layoff system introduced at the time has failed to achieve the goal of making the nation’s labor market more flexible.
It is against this backdrop that the labor reform plan now being drawn up by the government should include, among other things, concrete measures to make layoffs easier.
Also not to be ignored are measures to expand the wage peak system and flexible working hours, both of which have yet to take root in workplaces here.
This is all the more necessary because Korea has recently instituted some measures that are detrimental to labor market flexibility ― like the decision to extend the retirement age to 60 and another that gives permanent status to nonpermanent workers who have been employed for two years.
All things considered, the government plan to overhaul the labor market ― with the aim of killing two birds with one stone ― increasing flexibility in the market for permanent workers and addressing the problems of nonpermanent workers ― is not an easy job.
It presents a dilemma, not only for the government but also for employers and workers. For instance, employers will benefit from greater flexibility when it comes to permanent workers, but at the same time they will certainly have to make some concessions regarding nonpermanent workers.
As for labor, it will likely have to yield some of the rights and privileges of permanent workers in return for its gains regarding nonpermanent workers. This might create conflicts within labor groups.
That being the case, the reform plan should strike a balance to achieve a win-win situation for both employers and employees and for both permanent and nonpermanent workers.
This necessitates an active role for the tripartite committee of government, management and labor, which has been entrusted with the task of forging a social consensus on labor issues.
The International Monetary Fund warned that Korea’s growth potential could sink to the 2 percent level in 10 years unless it reforms its labor market and addresses problems like discrimination against nonpermanent workers.
It is clear what we need to do to prevent such a gloomy forecast from becoming a reality.
