By Yoon Ja-young
The dualism in the labor market which divides non-regular workers and regular workers is a major hurdle for Korea's economic growth, the Organization for Economic Cooperation and Development (OECD) pointed out in a recent report.
In the "Going for Growth 2017" report, the organization pointed out that productivity in Korea is only about half as high as the average of most advanced OECD countries, while working hours are among the longest. In the annual report, the OECD evaluates structural reform of member countries, making suggestions for sustainable growth.
It also pointed to the increasing inequality in the country.
"The share of disposable income of the poorest 20 percent of the population remains below the OECD average, reflecting wage inequality stemming from labor market dualism and the weak redistributive effect of the tax and social transfer system," it noted.
"A comprehensive strategy to break down labor market dualism is essential to reduce big wage inequality resulting from the large wage gap between regular and non-regular workers," it added.
One out of three workers in Korea is a non-regular employee, who often gets a lower salary and fewer benefits compared with a regular worker.
The OECD recommended relaxing employment protection for regular workers while increasing the minimum wage and expanding social insurance coverage and training for non-regular workers.
It also required the country to boost the employment of women by strengthening policies to support female labor force participation through improving the quality of childcare and the work-life balance. It also stressed fully implementing maternal and parental leave.
"The employment rate of women is 21 percentage points below that of men, the largest gap in the OECD, limiting growth and social inclusion."
It said Korea should enhance childcare quality by making accreditation mandatory and strengthening competition; and "increase the take-up of maternity and parental leave systems by enforcing compliance and raising the benefit level for parental leave."
The organization also proposed reducing the regulatory burden on economic activity as one of policy priorities for Korea this year.
"Restrictive product market regulation hinders competition, slowing innovation and productivity gains, particularly in the service sector," it noted.
Improving the efficiency of the tax system and beefing up the social safety net were additionally picked as policy priorities. Pointing out that Korea's social spending as a share of GDP is only half the OECD average, it recommended the government to gradually raise tax rates to finance rising social spending. "Higher taxes on property would reduce inequality," it added.
The organization also asked for more support for the elderly with the lowest incomes to reduce Korea's poverty rate for the population aged over 65 years which is the highest in the OECD at 49.6 percent.