The Korea Development Institute has called for more flexibility in Korea’s labor structure in terms of its wage system and working hours.

“With unemployment and the working poor becoming serious social issues in Korea, companies should no longer stick to their old-fashioned labor system,” said KDI researcher Yoon Hee-sook at the state-run think tank’s seminar on labor market changes on Wednesday.

Pointing to Korea’s rigid wage and promotion system, she noted that Korean companies have long favored the seniority-based wage system, in which an employee is promoted in order of his or her proximity to retirement.

This helped companies to secure talented employees and their loyalty during a period of national rapid economic development.

“Now the system is becoming a huge burden to companies, so they either avoid hiring new employees or fire employees in their early 50s even before retirement,” Yoon said. “Companies should now consider turning to a performance-based wage system.”

In Korea, she noted, seniors working for up to 20 years are paid 2.7 times more than entry-level employees, the highest figure among the OECD nations. In Sweden, the difference is only 1.1 times.

Yoon also pointed to Koreans’ long working hours. Last year, Korean employees each worked an average of 2,071 hours, 400 hours more than the OECD average. Still, Korea’s working productivity was ranked at No. 24 among the 34 member nations.

“Long working hours also hinder the entrance of the female and youth workforce. Korea’s working-hour system should be more diversified to include part-time hours, working from home and flexible working hours,” the researcher said.

For starters, the government should propose relevant laws and make the public sector take the lead in structural changes in the labor system, she said.

“The government should make the best practices by adopting the flexible working system in the public sector first and share the results with private companies.”

By Shin Ji-hye (shinjh@heraldcorp.com)