Park beats drum of labor reforms

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Park beats drum of labor reforms

President Park Geun-hye Tuesday vowed to push forward her reform agenda and urged bipartisan support from the legislature, business community and labor unions for changes to Korea’s labor market.

“Without reform, the country’s future is dark, and we will leave debt to the future generations,” Park said during opening remarks at a cabinet meeting. “The youngsters will have to bear a heavy burden and painful cycles will repeat.”

She stressed the need for reforms to the labor market, public sector, financial industry and education industry.

“The administration could have chosen an easy path, but it is my will to bequeath a better future to the people and our next generation by using the power bestowed on me by the public,” Park said.

She warned that the crisis in Greece is an example of a government’s failure to persuade the public to accept needed reforms.

Park said labor market reform is the priority for the country’s survival. She said ending discrimination against irregular or non-staff workers and improving flexibility of the labor market are the key tasks.

Park particularly noted the importance of tackling youth unemployment, calling it a key to sustainable economic growth.

“There are more than one million youngsters struggling to find jobs,” Park said. “When the retirement age is extended starting next year, youth unemployment will grow worse, unless we smoothly introduce the peak salary system.”

Starting in 2016, the retirement age for those working for companies with 300 or more employees or public institutions will be extended to 60. Currently, the retirement age is 55.

As most companies operate on a seniority-based wage system, the extension is expected to increase labor costs and companies may hire fewer new recruits. Under the peak salary system, salaries of older employees will peak a few years before retirement and then gradually decrease, saving the companies money and allowing them to hire entry-level employees.

Labor Minister Lee Ki-kweon said earlier Tuesday that the public sector will be the first to introduce the peak salary system.

Later in the day, Deputy Prime Minister for the Economy and Finance Minister Choi Kyung-hwan also vowed to push labor market reforms during the latter half of this year.

“The government will keep working on [getting labor and management to implement] urgent reforms, such as introducing the peak wage system and base salary system and shortening working hours,” Choi said at a meeting with journalists from the Seoul Foreign Correspondents’ Club on Tuesday.

He said the government is preparing other measures such as guidelines for employers’ reassignments of workers and more flexible contract terminations.

Choi explained a government plan to create some 100,000 jobs for young people who get job training or participate in internships at major conglomerates and prominent midsize companies.

Beyond the private sector, Choi said his economic team is pushing for job openings for young people at state-run enterprises, schools and hospitals.

The ruling party said Monday that labor reforms will be its top priority for this year. “For the future of this country, we must succeed in labor reforms,” Saenuri Chairman Kim Moo-sung said. “No matter what disadvantages and protests we have to face, we will push it forward.”

When Park met with Kim last week, the president stressed the importance of labor reforms and sought the ruling party’s cooperation. Kim has been aggressively promoting the agenda over the past week.

Senior officials of the party, administration and presidential office will meet today, and labor market reforms are expected to be the main issue to discuss.

While the government and the ruling party are strongly promoting the peak salary system, unions oppose the measure, saying it will only benefit employers, and there is no guarantee that new jobs will be offered to youngsters.

Reflecting the concern, Park said during the cabinet meeting that the government must start talks with the labor community and employers.

The president also vowed to improve the financial industry, adding that high-quality jobs could be opened up as a result.

She also promised to root out corruption, irregularities and inefficiency from the public sector and overhaul the ineffective education system to focus on vocational training.

BY SER MYO-JA, KIM KI-YOON [ser.myoja@joongang.co.kr]

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