[Op-Ed] Job-Kill

Earlier this year, the government supported a job sharing project to prevent the loss of 220,000 jobs. State-owned companies, banks and large private companies increased employment by cutting the salary of entry-level employees among college graduates, and 23 percent of small and medium-size businesses joined the effort.

But this is not enough to overcome the economic crisis. As certain indexes have signaled the economy hitting the bottom, the government has changed its policy priorities. Financial Supervisory Commission Chairman Yoon Jeung-hyun said at the end of March, “Both job sharing and restructuring must be conducted at the same time.”

More people are seeing restructuring as inevitable. Yoon blasted Friday complacency by companies that are trying to skip restructuring, saying, “Corporate restructuring is a matter of life and death for our economy.” Bank of Korea Gov. Lee Seong-tae also said, “Companies must strengthen their economic fundamentals by seeking rigorous corporate restructuring.” Financial Services Commission Chairman Chin Dong-soo said, “We will conduct drastic restructuring.” Instead of “economic crisis” or “financial crisis,” “corporate restructuring” was placed at the top of the hot issue section of the homepage of the Korea Development Institute, the country’s leading state-run think tank.

Layoffs are the core of restructuring. When a recession hits the United States, merciless “job-kill” removes a large number of jobs. When the economy picks up, however, those laid off are reemployed. The unemployment rate rises as less competitive companies are kicked out of the market. The number of jobless shot up from 450,000 to 1.38 million five months after the financial crisis hit last year. Though a huge backlash against restructuring is expected based on past experience, the country simply cannot survive the global crisis without layoffs.

Korea ranked 152nd out of 181 countries in the World Bank’s assessment of labor market flexibility. This drags Korea’s national competitiveness down. Though member unions of the Korea Confederation of Trade Unions such as that of Hyundai Motor might have prevented job-kill by threatening their management, the companies face death without restructuring. It is impossible to maintain national competitiveness while keeping a labor market led by full-time union officers at large companies. Better job creation will come only after Korea changes labor practices by temporarily sacrificing jobs.

Editorial Writer Hong Kwon-hee (konihong@donga.com)