Flexibility the name of the gameFew would argue that job creation and easing economic polarization are among the most pressing tasks facing President-elect Park Geun-hye, who has promised to create 1.5 million jobs and ease economic inequality. But this is more easily said than done.
Previous governments have all tried their best and yet consistently fallen short in this respect. Former President Roh Moo-hyun vowed to added two million, and incumbent Lee Myung-bak pledged three million, both of which they missed by a long stretch.
Over the last decade, wealth inequality has also deepened, mainly due to slow economic growth and the second failed attempt to reform working conditions. The Roh Moo-hyun administration promised from the beginning that it would stand with labor unions, but it learned that it could not stimulate jobs and ease polarization without making the labor market more flexible. It tried to persuade unions at large manufacturers to get on board but failed to get them to cooperate.
However, the unions need to bend more in order to boost job growth and mitigate polarization, and countries with flexible labor markets tend to have higher employment rate. Germany, which prides itself on protecting labor since the sector was deregulated in the 1990s, has become more competitive in the ensuing years.
The hard part of the battle for Korea is getting intractable and powerful unions at large enterprises to sing from the same hymn sheet as the government, as they are loath to sacrifice their vested rights. But past failures to reform the labor market explain why it is now regarded as one of the world’s most rigid.
However, no matter how difficult it may be, labor reform is critically needed. Park erred by demanding large companies ease laying off employees as they restructure. Her hope of sustaining the status quo on jobs is understandable, but despite all her good intentions, such comments can end up doing more harm than good. Large companies often cut employees as a last resort to stay afloat. Without being able to do this, more would go belly up thus putting entire workforces out of work. Moreover, if her words were followed, the unions would grow even more powerful and temporary or part-time workers would suffer greater discrimination.
However challenging, the incoming president may have to initiate labor reform in the direction of greater flexibility as well as security. Justice in the economic field should start with making the labor market fairer.