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[Editorial] More Flexibility Needed in Labor Market

Posted December. 26, 2008 23:30,   


The Labor Ministry says it will revise labor law next year so that businesses can more easily hire and fire workers. Article 24 of the Labor Standards Law stipulates that companies can lay off their employees “on the condition that it is urgently required.” Employers, however, say the ambiguous clause makes it practically impossible for them to dismiss workers. This is why companies prefer hiring temporary and outsourced workers.

Korea’s labor market is notorious for rigidity and the conditions of hiring and firing are complicated and costly. According to a World Bank report on the global business environment, Korea ranked 131st out of the 178 countries last year in the corporate environment for hiring. Experts expect to see Korea’s ranking slide down to 152nd this year. Of the eight categories, Korea performs the worst in employment. The inflexibility of the Korean labor market eats away at the country’s international competitiveness and hampers job creation.

Those with vested interests such as permanent workers and unionized staff at conglomerates are against the ministry’s planned revision, warning of frequent mass layoffs. Companies, however, are seeking to move their operations overseas and hire temporary workers in a desperate attempt to survive. The polarization in the labor market can no longer be overlooked given the rise in the number of temporary workers to eight million.

Economic growth next year is expected to range between one and two percent, or recession could hit. President Lee Myung-bak said Wednesday that his administration seeks to help the country achieve positive growth next year. The number of jobs necessary for domestic companies to produce goods worth one billion won (761,615 U.S. dollars) dropped from 24.4 in 1995 to 14.7 in 2005, a drop of 40 percent. This is an era where growth can be achieved not necessarily with a large number of workers. Among the top 500 domestic companies, 230 plan to reduce hiring 16.5 percent next year from this year. Half of the remaining companies have yet to draw up next year’s hiring plans. It is hard to predict how many businesses will go bankrupt next year. The government has set a goal of creating 100,000 jobs for next year, but nobody knows if this is attainable.

The most important task in 2009 is the creation of as many jobs as possible. Overall job security in the country is more important than that of an individual. Both firing and hiring should be more flexible in the labor market, especially because more jobs will be lost due to a worsening economic situation. If businesses hire more workers thanks to a more flexible labor market, this will eventually lead to increased job security. Nevertheless, the government will have to draw up more effective measures to help people having difficulty finding work, looking for a new career, or trying to establish their own business to reduce the side effects of a more flexible labor policy.