SEJONG, Aug. 27 (Korea Bizwire) — South Korean youths are faced with the stark reality of ever-decreasing job opportunities as companies remain reluctant to hire amid a protracted economic slump, and are poised to slash labor costs to prepare for the extension of the retirement age to 60 next year.
Asia’s fourth-largest economy is plagued by high youth unemployment, which has forced the government, labor and management to engage in talks to address the critical problem as well as the country’s “dual labor market” structure.
The jobless rate for those aged 15-29 stood at 9.4 percent in July, which is much higher than the 3.7 percent average for the entire country.
The so-called dual market refers to the gap between full-time regular employees who enjoy “excessive” job security and good pay, and non-regular workers who are usually paid less. Last year, an average non-regular worker’s wage stood at around 65 percent of their full-time counterparts.
Observers say Wednesday’s decision by the Federation of Korean Trade Unions (FKTU) to return to the tripartite negotiations after a four-month boycott, reflects growing public calls for the three parties to come up with measures to resolve the high youth unemployment rate and create quality jobs for young people.
Public opinion has generally been favorable to revamping the country’s rigid labor market rules, even though umbrella unions like the FKTU have opposed any kind of change that can make it easier for companies to dismiss workers.’
“The outcome of the three-way meetings is uncertain, but there is enough pressure being exerted on all parties for earnest talks to take place,” said a government official, who declined to be identified. He pointed out that the Park Geun-hye administration has staked its reputation on completing labor market reform within the year.
Opponents of labor reforms argue that there are fundamental problems that should be addressed first, pointing to the mismatch between corporate requirements and job seekers’ capabilities.
The situation is further compounded by the fact that university graduates are shunning work in small and medium enterprises (SMEs) and only showing interest in big companies. This is causing chronic manpower shortages for SMEs, while at the same time driving up unemployment.
The reluctance of university graduates to work for SMEs can be explained by the fact that wages given by these companies stood at little over half of what was paid by big businesses in 2014.
Labor unions have argued that pushing for reforms at this juncture overlooks South Korea’s inadequate social safety net that is not good to cope with social problems if firing becomes easier.
Reflecting this impasse, Finance Minister Choi Kyung-hwan said Wednesday that the government will do all it can to help find middle ground to address the needs of companies and labor. He, however, said if no breakthrough is made, Seoul will be forced to take action that can enhance flexibility in the labor market.
At present, some 70 percent of all companies give wages based on seniority regardless of productivity. Local economists said this was not a problem when the country’s economy was expanding rapidly, but it is not sustainable when growth is weak.
They said that reforming the labor market is critical for creating more jobs for young people and making the labor market more flexible is critical for enhancing the country’s global competitiveness.
As part of this drive, the government has said all 316 public corporations and organizations will be required to adopt a peak wage system by the end of this year. The system calls for the retirement age of workers to be pushed back, which will give these people greater job security.
The same people benefiting from this will have to accept lower wages for a few years before retirement, with the money saved by this arrangement to be used to hire new employees.
Late last month, the government even announced a comprehensive job market program that calls for creating some 200,000 jobs by taking advantage of the peak wage system and by offering state subsidies, and urges the private sector to follow suit.
Critics, however, said that even if the peak wage system is widely adopted, there is no guarantee that this will lead to more jobs for young people.
Yun Hee-sook, a research fellow specializing in welfare policy at state-run Korea Development Institute, said the peak wage system pursued by the government won’t result in a large number of jobs being created, yet it can reduce the repercussions of the retirement age being pushed back in the next two to three years.
“If an agreement is reached on this less contentious matter, the tripartite talks can gain traction so it can tackle the much more prickly issues that can alter the overall labor market,” she said.
“While there are differences in views, there is no way to overlook the fact that some sort of change must be made in the labor sector if South Korea is to stay competitive on the global stage.”