[Outlook]A better approach to employment
The year is drawing to its end. It will soon be time to hang up a new calendar, but with the economic outlook so gloomy, this doesn’t feel very exciting. People are suffering for a variety of reasons but unemployment is particularly serious. It wasn’t easy to create new jobs when economic growth was at around 5 percent. Now that even 3 percent growth seems acceptable, many are worried that existing jobs will cease to exist.
Jobs can be created when there are new employers and when the conditions are right to hire. Looking at many countries, it is proven that people flock to places where there are jobs. Those countries where it is easy to employ people have more abundant jobs.
These two factors are like the two wheels of a bicycle. The government must consider them both when creating employment policies. When there is a lack of work due to an economic slowdown, a good policy must focus on creating jobs for low-income earners, such as those that come from public projects. However, there is a limit to the government’s ability to create work. A jobs policy should focus on improving regulations to make it easier to employ people.
In our country, jobs for those in their 20s have been steadily declining since 2000. In particular, few companies are recruiting new workers because once they do so, it is difficult to terminate employment.
Companies thus have a tendency to manage, no matter how hard it may be, with existing manpower rather than hiring more.
Another new tendency is when companies hire workers, they are much more careful than they used to be. An increasing number of employers spend several days and nights with applicants before making final decisions. Because the way out is clogged, the way in gets clogged as well. As a result, countless youths haven’t found jobs yet.
One of the ways to make it easier to employ people is to make it easier to terminate employment as well. In particular, making it easier to let people go in the early period of employment can benefit both employers and employees. It would be a good idea to introduce a new system so that companies hire people for a certain period at first and change their employment status to permanent later.
That is, a person can have a beginner’s contract for a certain period of time, and after a certain period of time, the person can become a regular worker. A person is employed as a contract worker in the beginning but if his competence is proved after evaluations, he becomes a regular worker within, for instance, four years.
The system is good for both management and labor. Companies will hire people and observe them closely to make a judgment about whether they are necessary or not. This possibility gives companies flexibility and increases manpower efficiency.
Employees can also find out whether the job suits them or not. If workers become regular workers after this procedure, their satisfaction with jobs and job security will increase.
If it doesn’t work for either a person or his employer, the worker can quit his job within three or four years and seek new employment. If this system becomes commonplace in our country, youths will have several years of job experience, and the youth labor market will become lively and rich, solving the problem of youth unemployment.
Certain measures are required for the system to work. First, the current regulations limiting the employment period for contract workers to two years must be amended. The most desirable thing to do is abolish a maximum period, but if that is too difficult, the limit must be extended by as long as possible. For instance, China has recently extended the period to 10 years.
Second, proper support is required. A certain amount of subsidies can be provided to the new employment system, as is done for the central and local governments’ youth internship programs. An increase in employment gives the state more tax resources. Therefore, if the government reduces or exempts the corporate tax for companies that introduce the new employment system, it will both provide an incentive to participate and fill the government’s coffers.
*The writer is a professor of economics at Sogang University. Translation by the JoongAng Daily staff.
by Nam Sung-il