Strengthen social security first
Deputy Prime Minister and Finance Minister Choi Kyung-hwan’s recently commented that the overprotection of permanent employees was causing a bottleneck in the labor market and a surge in the temporary work force. He said if it is made easier to lay off permanent workers, the job market will become more flexible. His comment set off a heated debate between the labor sector and employers. Some say actions are needed to overhaul the permanent employment system to ease rigidity and raise effectiveness in the job market while others are concerned about a decline in labor conditions that could only worsen the economy.
Choi Kyung-hwan, deputy prime minister and finance minister, implied that action is needed on easing regulations to facilitate layoffs of permanent workers in order to enhance opportunities and benefits for the irregular work force.
The best action that could be taken is to make irregular workers permanent. Yet the head of economic policy is trying to make it easier for employers to lay off permanent workers, just as if they were members of the irregular work force. The move would end up degrading labor conditions, which could further dampen consumption and slow down economic recovery.
Choi also said that companies are shunning permanent recruitment because, under the current framework, a full-time job is secure until retirement at 60, and called for restructuring wages. The wage system in individual workplaces is determined by the nature of a company’s work and how much it is able to pay staff. The matter should be between employers and employees and should be beyond government meddling.
A study shows that a wage system does not affect corporate productivity. Many companies incorporate performance standards in addition to seniority in setting salaries. Due to the extension of the retirement age, some adopt a salary peak system based on a labor-management agreement. The government can incite unnecessary conflict in workplaces by encouraging changes in wage systems.
The government has repeatedly called for overhaul in the wage system and the easing of regulations on layoffs, citing rigidity in the labor market. But various data underscores the opposite. The Korean labor market is not rigid at all. According to a report on Korea’s labor conditions in an international context by the Korea Labor Institute, which was commissioned by the Ministry of Employment and Labor, Koreans spend 5.1 years in a job on average, the shortest among Organization for Economic Cooperation and Development (OECD) nations. The OECD average is 10 years. The data highlights Korea’s job insecurity. Temporary workers make up 23.8 percent of the working population, the second highest in the OECD.
This is nearly double the OECD’s average. Cases of mass layoffs are also third largest among the OECD. The country is 17th among OECD countries in regular dismissals.
Although the retirement age is currently around 57 and 58, few can stay employed beyond 49. Most are pressured to voluntarily retire in advance. Companies are legally allowed to lay off employees if they are in a management crisis. Last year, 380,000 workers were laid off, almost as many as in the 1997 financial crisis.
The government argues for a mechanism that will allow companies to lay off workers easily like in multinational firms in advanced nations. But it has failed to take into account that these countries have sound social security benefits.
Because of poor social security, Koreans cannot lead a normal life and support a family if they have no work. To lose your job is a death sentence to Koreans. Since the massive layoffs in Ssangyong Motor five years ago, 25 workers and their family members have ended their own lives.
Jobless people get a state allowance of up to 40,000 won ($36) a day. They are entitled to the paltry sum for 90 to 240 days a year according to certain conditions. They receive around 1 million won a month for eight months at the most.
The situation in the European Union is entirely different. When people lose their jobs in Germany, they get up to 90 percent of their salaries for three years. Denmark pays up to 90 percent of salaries to laid-off workers for two years. The Netherlands provide 90 percent for three years and Sweden pays the entire salary for a year.
The government should strengthen guidelines for dismissing workers and work on bolstering the social security net. It is nonsense to speak of layoffs while the government says it wants to achieve an employment rate of 70 percent.
Translation by the Korea JoongAng Daily staff.
*The author is secretary-general of the Federation of Korean Trade Unions.
BY Lee Byung-kun