Lee Hyo-sik is Finance Desk editor at The Korea Times. He manages finance-related stories on macroeconomics, banks, stocks, bonds, crypto etc. He is passionate about covering what's happening in Korea's financial industry and explaining it to both Korean and non-Korean readers. You can reach him at leehs@koreatimes.co.kr. Your insights and feedbacks are always appreciated.
Foreign firms urged to hire more young people
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Vice Employment and Labor Minister Koh Young-sun speaks during a policy presentation for CEOs and executives of foreign companies at the Plaza Hotel, downtown Seoul, Friday. Koh called on foreign businesses to hire more young people and help them find jobs abroad. / Yonhap
By Lee Hyo-sik
CEOs complain
about high wages,
militant unions
By Lee Hyo-sik
The government has turned to foreign companies operating in the country as part of its ongoing labor reform campaign, calling on them to hire more university graduates to help alleviate the deteriorating job market conditions for young people.
However, non-Korean businesses say it has become more difficult to expand their workforce, citing surging labor costs. Higher labor costs have emerged as a key factor undermining the competitiveness of Korea Inc., they said, urging policymakers to make the rigid labor market more flexible and stabilize labor-management relations.
“The most important corporate social responsibility is to create jobs,” Koh Young-sun, vice minister of employment and labor, told about 200 CEOs and human resources managers of foreign businesses, including AIG Korea and IBM Korea, at the Plaza Hotel in downtown Seoul, Friday.
“We urge foreign business communities to hire more young people and help them find jobs at their global headquarters,” he said.
The government will continue to push ahead with the ongoing labor reform drive to promote a performance-based salary system, reduce working hours and ease the widening gap between regular and contract workers, the vice minister said.
“The recent agreement reached by the tripartite committee of labor, management and the government on labor reform steps will benefit workers, companies, jobseekers and all others involved,” Koh said. “I believe the ongoing labor reform will create much-needed jobs for young people and bolster Korea’s sluggish economic growth.”
However, foreign CEOs showed a lukewarm attitude toward Koh’s remarks, saying that it is difficult to increase the number of their employees because of soaring labor costs and falling worker productivity.
They said the government should abolish the seniority-based payment system, limit the scope of the “ordinary wage,” make it easier for employees to hire temporary workers and reduce benefits for unionized workers.
A day earlier, GM Korea CEO Sergio Rocha warned that companies, domestic and foreign, have been moving their production overseas because of high labor costs here.
In a seminar, organized by the Korea Economic Research Institute (KERI), at the Federation of Korean Industries building in Yeouido, Rocha said the automaker’s labor costs have soared 50 percent over the past five years, the steepest rate among 26 countries where it operates plants.
“When the company has to negotiate with workers for wages every year, the management has to raise salaries to settle collective bargaining,” the GM CEO said. “Among the 26 nations where GM runs plants, Korea is the only place that we have to conduct wage negotiations with labor every year. This has weakened our global competitiveness.”
He warned that if wages increase at a current pace, more and more companies will move to foreign countries where they can make products at lower costs.
“Hyundai Motor Group produced only 5 percent of its cars abroad in 2002. But in 2014, the automaker produced 45 percent of its cars outside Korea,” Rocha said. “If Hyundai makes 95 percent of its vehicles in Korea now, imagine how many more jobs would have been created.”
Amy Jackson, president of the American Chamber of Commerce in Korea echoed Rocha’s views, saying many U.S. companies operating in Korea are complaining about surging labor costs.
“Many Korean workers think their salaries should increase every year, regardless of their performance or overall business environment, Jackson said. “This worker mentality and government rules encouraging wage hikes have made foreign businesses more reluctant to hire more workers and expand investments here.”