The Korea Herald

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[Editorial] Labor market reform

Trilateral cooperation needed to dismantle dual structure

By Korea Herald

Published : Dec. 25, 2014 - 21:28

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A trilateral commission of labor, management and government representatives agreed this week on the basic principles and direction of their future discussions on reforming Korea’s inflexible labor market. Under the agreement, the three sides committed themselves to concluding negotiations on three top agendas by March.

Members of the Economic and Social Development Commission shared the perception that a fundamental structural shift is needed to overcome the crisis facing the local labor market. Based on this recognition, they pledged to shoulder their share of the responsibilities and burdens to carry out the crucial task.

Their agreement came a day after the Ministry of Strategy and Finance called for structural reforms of the labor market as part of key policies designed to improve national competitiveness and boost growth next year.

In a meeting with her economic team Monday, President Park Geun-hye also raised the need to overhaul the country’s rigid labor market. She was right to point out that labor reform could no longer be delayed and it would be difficult to ensure sustainable economic growth without it.

This sense of urgency seemed to have prodded the trilateral commission to work out the basic agreement after long-stalled consultations. It was especially notable that its members set a deadline for completing discussions on the three most sensitive topics: the “dual structure” of the labor market; pending issues such as wages, working hours and retirement age; and improving the country’s social safety net, including unemployment allowances.

Buoyed by the results of Tuesday’s session of the commission, Finance Minister Choi Kyung-hwan described the agreement as “a very historical thing.” He said any economic achievement was possible if labor and management made “a grand compromise” by placing themselves in each other’s shoes.

But the minister’s expectation might prove somewhat hasty. As many experts note, the basic agreement marked only the beginning of a tough process of overhauling deep-rooted hiring practices and coordinating complicated interests not only between employers and employees but among workers themselves.

The Federation of Korean Trade Unions, the largest umbrella labor group in the country, said it had decided to join the discussions to block the government from unilaterally moving to restructure the labor market. A more militant organization, the Korean Confederation of Trade Unions, has boycotted the three-way consultations, claiming the agreement is a pretext to change labor market conditions for the worse.

The trilateral commission’s willingness and capability to make specific compromises will be put to the test when the government next week puts forward a package of measures aimed at improving employment terms for irregular workers and making it easier to lay off regular workers.

The core task of labor market reforms is to dismantle the dual structure by narrowing or eliminating the differences between payments and other working conditions of regular and irregular employees. The government and management certainly should take the initiative in this work. But labor unions, especially those of large corporations, also need to make some substantial concessions to resolve the deteriorating problem.