Finance minister hints at easing layoff rules

By Yoon Ja-young

Choi Kyung-hwan Finance minister

The government is considering easing rules for layoffs and overhauling pay systems to ease the plight of non-regular workers.

Since any changes are likely to come at the cost of regular workers’ rights, it will certainly entail a major union backlash.

“Without reform in the labor market, it isn’t easy to continue creating decent jobs. We need change if we wish to create decent jobs instead of non-regular jobs,” Finance Minister Choi Kyung-hwan said at a seminar.

Choi didn’t mention details but under current rules, layoffs are allowed only when there is an urgent managerial need, a clause which unionists say gives employers a great deal of discretion.

Non-regular workers’ average pay amounts to about 60 percent of what is paid to regular workers.

They are also excluded from other benefits.

According to Statistics Korea, one of out of three salaried workers is a non-regular worker including temporary workers or daily workers, with their ratio reaching 50 percent at some firms.

“Once businesses hire a regular worker, they should guarantee employment until the worker turns 60. The wage peak system isn’t working well, either,” Choi said.

He said businesses can’t sustain the labor system as wages continue to rise.

Choi said there could be diverse methods for this, such as changing the wage structure, instead of making layoffs of regular workers easier.

The minister denied repeated reports about eased layoff rules but said it is considering “rationalizing” the protection of regular workers and getting rid of discrimination against non-regular workers.

Choi cited Germany and the Netherlands as countries that have successfully reformed the labor market. “Those who have reformed well are doing well, but Japan, which failed to do this, is seeing the number of non-regular workers increase,” he said.

State-run Korea Development Institute President Kim Joon-kyung said at the seminar that an employee who has worked at one company for 30 years gets on average 1.4 times more salary than a new hire at French manufacturers. In Korea, the person would get 2.8 times more.

Byun Yang-gyu, a research fellow at the Korea Economic Research Institute, said, “Generally, flexibility in the labor market leads to a higher economic participation and employment rates.”

However, Korea’s labor market has the dual problems of inflexibility and instability, according to the researcher.

“The government needs to implement measures to make the labor market flexible and stable, banning irrational discrimination between workers while scrapping direct regulation on the use of labor,” he said.

Labor unions disagree.

“The government is talking about balance between regular and non-regular workers, but in fact it aims at enabling layoffs of regular workers anytime, just like non-regular workers. Everybody will be suffering perpetual job insecurity,” said the Korean Confederation of Trade Unions in a statement.