Time is running out on enacting measures to soften the landing of a shorter workweek for small and medium-sized enterprises. President Moon Jae-in’s government and the political parties should cooperate to stem the potentially huge fallout from the planned expansion of the shorter workweek scheme’s application to SMEs from the beginning of next year.
The local labor law was revised in February last year to reduce the maximum weekly working hours to 52 from the previous 68.
The reduced workweek came into force for companies with more than 300 employees in July last year. Starting Jan. 1, 2020, it is scheduled to be applied to firms with 50 to 299 workers, accounting for more than 82 percent of all businesses here. The remaining companies will be subject to the revised system from July 1, 2021.
Reducing working hours is needed to enhance the balance between work and life in Korea, where workers have long been tied to the workplace. Until 2017, an average Korean worker worked more than 2,000 hours annually, the second longest among the 34 member states of the Organization for Economic Cooperation and Development.
But a rigid implementation of the shorter workweek system could disrupt corporate activity to a significant degree.
Unlike large companies, most SMEs have little room to cushion the negative impact of implementing the shorter workweek. There are growing concerns that many smaller companies will be pushed over the edge, as they have difficulties hiring additional workers and meeting demands from existing employees for making up for a decrease in earnings due to reduced working hours.
A local research institute’s recent report made a grim projection of the potential damage from the expanded application of the amended scheme without taking any supplementary measures. It forecast that the rigid implementation of the shorter workweek would result in the closure of about 45,000 companies, a loss of around 253,000 jobs and a reduction of approximately 3.8 trillion won ($3.25 billion) in wage income. The country’s gross domestic product would also shrink by roughly 6.7 trillion won.
An effective way to cushion such negative effects is to expand a flexible working-hours system, which calls for adjusting working hours to 52 on average within a certain period by allowing employees to work longer when busy and later go on deferred leave.
In February, a presidential commission on economic, social and labor affairs agreed to extend the unit period currently set at three months to six months.
The agreement still falls far short of demands from the business community that the flexible system be implemented on a yearly basis. Many SME owners have also called for delaying the application of the shorter workweek system to their companies by one year.
Parliamentary deliberation on a bill aimed at expanding the flexible working-hours scheme has stalled for months due to differing positions of rival parties. The ruling Democratic Party has suggested accepting the proposal made by the presidential panel while the main opposition Liberty Korea Party has insisted on paying heed to calls from the business community.
In a meeting with leaders of opposition parties on Sunday, President Moon Jae-in expressed hope that labor groups would withdraw opposition to extending the period for applying the flexible working-hours scheme to six months.
Moon and ruling party lawmakers need to be more active in relieving companies of the burdens to be caused by the introduction of the shorter workweek.
Most advanced economies, including the US, the UK, Germany, France and Japan, implement the flexible working-hours system on the basis of up to one year, while allowing each company to decide on the specific period through a labor-management deal. This approach can be seen as more balanced, making it possible to protect rights for employees and guarantee the efficiency of corporate management at the same time.
The Moon administration should go beyond taking measures to supplement the 52-hour workweek system and readjust its stance biased toward labor.
It is necessary to consider differentiating the minimum wage by region, industrial sector and corporate size to help lessen the burden on employers. Moon should no longer stick to his campaign promise to turn all temporary jobs in the public sector into permanent ones, which has proved unrealistic.
Making the labor market less rigid, along with sweeping deregulation, is most urgently needed to revitalize corporate activity and shore up the slowing economy.