President Park urges prompt labor market reform

President Park Geun-hye at a Cabinet meeting on Tuesday urged prompt restoration of the Tripartite Commission (of labor, management, and government). “Labor market reform is, in short, about creating jobs for younger people. Labor and management should concede to each other to promptly restore the Tripartite Commission, and achieve a great compromise that the public expects,” she said. “The older generation, companies and workers in regular positions should share the pain and yield their vested interests to allow younger people escape form frustration and cultivate an opportunity.”

Labor market reform was the president’s first and main topic at the first Cabinet meeting after returning from vacation, which signals that there is not enough time left. The regular session of the National Assembly comes in September and then general elections fall next year and the presidential election the following year. At companies that have adopted the wage peak system, in particular, labor market reform is desperately needed to boost youth employment.

“If agenda setting for labor market reform is entrusted to labor-management negotiations that mainly speak up for just some overly protected sectors, the interests of vulnerable people can be omitted,” said Yoon Hui-sook, a researcher at state-owned think tank Korea Development Institute, at a discussion meeting for labor market restructuring in December last year. When a successful compromise was reached in the 1990s in Germany and the Netherlands, the agreement was made under strong government leadership. The Netherland’s Wassenaar Agreement in 1997 was reached after the government warned that it would force unilateral policy if social partners failed to agree.

The government should pass legislations, such as changing employment rules to enable autonomous agreement between labor and management, to secure employment flexibility and ease labor market instability. Measures should also be put to place through which the opinions of expert groups and the public could also be reflected.

In June, the government announced its first batch of labor market reform measures including a wage peak system and promotion of co-prosperity of regular and non-regular workers. However, little progress has been made so far. The government should devise a more elaborate and systemic roadmap that the public can embrace, apply it in public institutions first, to persuade the public and induce participation by labor and management. In Korea, there are 1.84 million labor union members among a total number of wage earners (labor union organizing rate at 10.3 percent). Among them, 1.34 million people are members of large labor unions composed of 1,000 people or more, accounting for 72.8 percent of all labor union members. The government and political sector should not avoid the responsibility of labor market reform that can protect the rights of a majority of workers and pave a way for economic growth, by only paying attention on the small number of vested labor union members. The president should spearhead the reform.