OECD gives tips on labor reform, deregulation in KoreaKorea must encourage companies to allow parental leave and expand affordable, high-quality child care in order to successfully reform the labor market, the Organization for Economic Cooperation and Development (OECD) recommended.
The multinational organization added that reforms in foreign direct investment and taxation policy were necessary for growth.
In its annual report “Going for Growth” released Monday, the OECD stressed structural reform is essential for sustainable growth of its member countries. The report evaluated each country’s reform policies and gave recommendations.
The Korean government said earlier this year that it was committed to making reforms in a variety of areas. The OECD pointed out the need for regulatory reforms and said the government should address productivity problems triggered by excessive working hours.
“Sustained rapid growth has brought GDP per capita to within a quarter of the upper half of the OECD countries, but productivity in Korea is only about half as high while working hours are among the longest in the OECD,” the report said. “Measures to break down labor market duality would boost productivity and encourage female employment.”
For labor market reform, the report recommended that companies increase parental leave and pursue more flexible working arrangements, including adding part-time jobs and expanding affordable, high-quality child care.
As for the business environment, the report said that regulatory reforms are essential.
The organization noted that a global fund was launched last year to encourage investment by overseas venture capitals in Korea, but a measure passed in 2013 prevented large firms from entering certain areas of business that are reserved for small and medium-size enterprises.
“Improving the efficiency of the tax system by relying more on indirect taxes would promote growth while easing budgetary pressures associated with rapidly rising social spending,” it said. “[Korea should] phase out entry barriers for large firms from business areas reserved for SMEs, which are primarily in the service sector.”
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