New labor paradigm

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New labor paradigm

The paradigm of the labor market is rapidly changing. The Korean economy was able to raise its growth potential through long working hours, unrivaled diligence and passion for education. Six decades after the enactment of the Labor Standards Law in 1953, however, our working environment is undergoing a seismic transformation. As many as 180 bills are awaiting National Assembly decisions to shift the previous system based on long working hours and low pay to a totally new one based on shortened working hours and higher pay. If those bills are passed, ordinary wages will be increased, while working hours will decrease. The changes also mean a substantial increase in the minimum wage, an expansion of maternity and child care leaves, and an extension of the retirement age.

In the wake of such drastic change, companies have to wrestle with tough challenges. But that’s unavoidable for us since we’ve joined the exclusive club of developed economies. If our businesses don’t adapt to the shift, they can’t help but perish. The government believes the changes will help achieve the 70 percent overall employment rate President Park Geun-hye pledged during her campaign.

However, unless reduced working hours and increased wages are accompanied by increased productivity, the changes can lead to a critical loss of jobs.

We don’t have to be scared. Germany, for instance, overcame the same kind of economic crisis through a grand compromise on working hours and wage cuts in return for job security among labor, management and its government. In Korea, too, Yuhan-Kimberly, a leader in the health and hygiene industry, successfully caught the two rabbits - improved productivity and increased profits - through an ambitious introduction of a four-shift-a-day system. It all comes down to how to ratchet up productivity.

Curtailing working hours and raising wages are a new experiment for our economy. The only way to cope with the shift is taking it as an opportunity to reform our labor market. According to the World Economic Forum, Germany took sixth place in national competitiveness even when it was ranked 119th in the flexibility of labor markets. The secret lies in its unparalleled labor productivity of $55.75 per hour - more than twice the figure in Korea - thanks to massive investment in R&D and education of employees. Otherwise, our bold shift will only lead to an economic disaster in Korea.
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