Correct wrong labor policiesAnother alarm bell is ringing in the rigid labor market in Korea. According to the World Economic Forum’s recent annual report on national competitiveness, the country is performing worse in all labor market categories compared to a decade ago — except in terms of women’s participation in economic activities. In particular, Korea’s ranking in terms of cooperation between labor and management — a key indicator of an economy’s global competitiveness — plunged to 124th, down from 95th in 2008. More alarming is Korea’s steep fall in its flexibility of employment and layoff ranking, which plummeted to 87th from 45th a decade ago.
If you narrow the scope of comparison to seven economies — members of the so-called “20-50 Club” whose populations exceed 50 million and whose per capita incomes surpass the threshold of $20,000 — South Korea’s retreat in labor becomes more noticeable. Among the seven countries, Korea was the only one with declines in labor-management cooperation.
The problem is that such an inflexible labor market is bad for employment. While the employment rate of all members of the 20-50 club — for those aged between 15 and 64 — rose in the second quarter of the year compared to a year ago, the figure for South Korea remained stagnant at 66.6 percent, lower than the OECD average of 68.3 percent.
These statistics are the proof that labor reform is a must — not a choice — because the more rigid the labor environment becomes, the more reluctant the companies are to recruit workers. Nevertheless, the Moon Jae-in administration has adhered to the so-called “income-led growth” policy aimed at raising the minimum wage for the poor to improve their livelihoods. The untested economic experiment wreaked havoc on our economy as an increasing number of companies laid off employees to save labor cost.
A survey by the Korea Economic Research Institute on our top 1,000 companies underscored the need for the government to ease regulations (30.2 percent) and raise labor flexibility (26.1 percent) next year. In particular, local manufactures demanded heightened labor flexibility above anything else. In Tuesday’s briefing by the Ministry of Trade, Industry and Energy to the president, Moon ordered policies to complement unwanted side effects from the government’s labor policy. “The ministry must answer the growing public criticism that the government has no industrial policy,” chastised Moon. It is time for the administration to raise efficiency in the labor sector.
JoongAng Ilbo, Dec. 20, Page 30