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[Opinion] Questionable Labor Policy

Posted August. 10, 2006 05:29,   


“There is no need for provable reasons for dismissing employees for an initial period of two years. Post-employment evaluations are permitted,” states the contrat première embauche (CPE) or “first employment contract,” translated into English. The CPE was introduced by the French government in January this year as an amendment to its labor law.

The introduction met with a huge backlash from undergraduates and workers. The resistance was extremely strong to the point where more than one million protesters took to the streets in a single day in March. Though the French Constitutional Court upheld the provision, the French government had to give in to enormous resistance and withdraw the bill.

The idea of an amendment to the labor law such as CPE was proposed within the French government in the first place because unemployment is a highly serious social issue in the country. In France, once a job seeker succeeds in getting hired, it is literally a “heaven” for him or her. French workers enjoy a 35-hour workweek, almost irrevocable lifelong employment and handsome pension payments. On the flip side, employers are reluctant to increase their payrolls because lay-offs are all but impossible and an addition to their staffs means a heavy burden of social security taxes. As a result, the unemployment rate goes over 10 percent. The number is as high as 23 percent among young, first-time jobseekers.

In Korea, the government and the ruling party decided to turn the non-regular employment contracts for approximately 54,000 in the public sector into regular ones. The message is obvious: “no dismissals.” The decision is understandable to some extent, given all the uncertainty and discrimination temporary employees, whose number has increased exponentially since the Asian financial crisis, must have gone through. However, good intentions do not necessarily lead to good results. The economic principle applicable to the current Korean labor market is that the government’s measure could result in “fewer employments across the job market.” As proven in the French case, while beneficiaries from the government’s decision will end up better off, the labor market conditions might get tougher for unsuccessful jobseekers.

The objective of encouraging employment is more achievable when both dismissal and reentry into the labor market are made easier. The two are not out of step with greater labor market flexibility and higher efficiency in the public sector, the government’s reform priorities. Making the decision public, the government stressed, “We in the government are taking the initiative to set an example.” The remarks have been made in order to apply more pressure on employers in the private sector. But those in the government should realize that any hurried execution of their decision will only cause weaker competitiveness of companies, shrinking investment and employment capacity, slowing in economic growth and more suffering to the less economically privileged.

Heo Seung-ho, Editorial Writer, tigera@donga.com