Youth joblessness looms over talks

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Youth joblessness looms over talks

The midnight oil in a special room occupied by negotiation teams of government officials, union workers and corporate representatives at the Central Government Complex in Seoul has been burning for days.

The air in the room was certain; time was against them in laying out the general outline for reforming the nation’s labor structure, the biggest movement for change seen in nearly a decade.

Although the three parties have trouble coming to terms on the details, one thing that all three agree on is that reforming the labor market is no longer an option.

The urgency stems from the belief that interim patches like supplementary budgets poured into the economy will no longer be effective in the long run and that fundamental change is urgently necessary.

President Park Geun-hye first addressed the issue under her ambitious “three-year economy innovation” pledge announced in February last year. The goal is to raise the nation’s employment rate to 70 percent by 2017.

Statistically, the Korean employment rate has been improving. It was about 58 percent in February. But the youth unemployment rate remains high. In fact, the unemployment rate of those aged between 15 and 29 in the latest report reached its highest level nin 16 years at 11 percent. The so-called “real jobless rate,” which is regarded as a de facto jobless rate by including those preparing for employment, recorded a record high to 12.5 percent in the month.

While monthly economic growth remains flat at less than 1 percent and unemployment of young people persists as a major concern amid a dampened domestic market, Park’s economic general Choi Kyung-hwan since the second half of last year has urged an overhaul of the labor market by implementing a more flexible system. But the proposal met with strong opposition from the labor market and young people who are asking for more secure jobs with better pay.

“Duality” in labor market

One of the most controversial issues at the table was improving “duality” in Korea’s labor market, which indicates improving working conditions between salaried and contract workers and employees.

Both labor unions and employers have not backed off from their initial positions on the issue so far. Labor parties say all contracted workers who worked for more than a certain period should be converted into regular workers; employers say they would accept the government’s proposal for adding two years of work to the two-year contract.

Over whether to improve working conditions for employees at subcontractors for conglomerates, negotiations also dragged on. The issue was related to improving the quality of jobs for young people as they shun working at SMEs or subcontractors for conglomerates.

“In order to make companies hire young people, they have to afford it,” said Kim Sung-taek, a labor market specialist at the Korea Labor Institute. “But those who are high-ranking, regular workers are under strongly protected conditions and trying to maintain their high wages.

“Under the dual structure between conglomerates and subcontractors, management at conglomerates also is outsourcing some work to subcontractors, rather than hiring new workers,” he said.

The issue of tackling the duality of the labor market structure has been frequently pointed out by the government.

A recent analysis by the Finance Ministry and Employment Ministry said the February’s worst youth unemployment, 11.1 percent, was because a high rate of students with university degrees shun working for SMEs or as contract workers, due to their relatively poor working conditions compared to regular jobs at conglomerates.

President Park also pointed out the reality at a cabinet meeting on Tuesday, saying, “The old customs and systems in labor market are hindering young people from getting a job and they can’t get out of the reality in which they suffer from low wages, discrimination and unstable employment even if they work hard.”

Finance Minister Choi also said at a cabinet meeting March 20, “The biggest reason for youth unemployment is the stiff labor market of Korea, because many companies shun hiring regular employees and they prefer contract workers. Youths are the biggest victims of this trend.”

Statistically, Korea records more than 70 percent of university graduates out of entire graduates from high schools. Most of the university graduates desire for a decent, white-collar job, as a regular employee.

This preference is largely due to poor working conditions of Korea’s contract workers. The latest statistics by Statistics Korea in October 2014 shows the average monthly wage of regular employees was 2.6 million won, 1.8 times more than those of contract workers, 1.45 million won. As of December 2014, the number of contract workers in Korea exceeded 6 million, accounting 32.5 percent in labor market.

“Although the chances are slim, many young job-seekers say they would be able to get a high-paid job at conglomerates,” said Lee Yun-hee, a director of the Youth Alliance for Future of Korea, a NGO representing young Koreans, by phone. “As they are highly educated with university degrees, most of young people do not want to get a job at SMEs.”

Disputes over job sharing

Besides giving better jobs to young people, the negotiations also include issues that could share the current amount of jobs with young people in two ways: adopting the so-called “peak wage system” and easing regulations on laying-off regular workers.

Both labor unions and employers reached an agreement on the necessity of adopting the peak wage system, which cuts wages for workers in a certain age under the newly revised employment act that extends the retirement age to 60 starting next year.

The peak wage system has been widely welcomed and proposed by many labor specialists, as it could give more room for companies to hire young people as entry level workers by cutting costs for high-paid executives or managers.

However, the two sides clashed over when to start cutting wages. Labor says the wages should be cut starting at 60, the legally set retirement age, if employees do not retire and continue to work. Employers claimed the wages should start to go down before 60, around 55, before retirement.

Unlike the matter of the peak wage system, they struggled to narrow their differences on the matter of “increasing flexibility in employment,” which refers to easing regulations on laying off regular workers.

Management says they should be allowed to freely lay off workers showing poor performances, and they believe it would lead to new jobs for young people.

Still, the labor negotiators say they would never accept layoffs and hiring contract workers as regular workers is the more effective way to create jobs.

In particular, the Korean Confederation of Trade Unions, one of the nation’s largest labor union associations that has refused to attend the trilateral meeting, declared to go on a general strike starting April, if the trilateral meeting makes conclusions in favor of management.

“Even now, many laid-off people are suffering, but the idea [on easing regulations on layoffs] would enable employers to fire people even if they had no difficulties in business management,” members of the confederation said in a joint statement on Tuesday. “Besides, other ideas, such as extending the two-year term of contract workers by an additional two years, had lots of problems as well.”

“If there is no conclusion at the talks, we worry the dual structure in labor market would become permanent and a more serious problem,” said Kim Dae-hwan, chairman of the Economic and Social Development Commission at the press meeting on March 24. He again declared to step down if there was no outcome before the second deadline.

“If we fail to resolve the matter of duality in labor market, it would hinder young people from getting a job at their early ages and even if they are hired as contract worker, they would not be able to show their full capabilities at labor market,” he said.

Kim at the Korea Labor Institute, said, “Unless Korea faces a decisive crisis in labor market, both labor unions and employers will not back off from their interests. The crisis would be the spike in youth unemployment, such as those in some European countries.”

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