Germany offers clues to job breakthroughs
By Kim Jae-kyoung
Unemployment has become President Moon Jae-in's biggest headache.
Despite his all-out efforts, Korea's job market situation has been a far cry from what Moon pledged during his election campaign.
In order to find a breakthrough, global economists suggest Moon take a close look at how Germany escaped from a long tunnel of employment troubles.
The jobless rate for Europe's largest economy stood at 5.3 percent in March, the lowest level since reunification in October 1990. This has been driven by strong domestic spending and solid international trade.
Mauro Guillen, director of the Lauder Institute at the University of Pennsylvania's Wharton School, said Germany can be a good model for Korea to emulate to find a solution to its employment woes.
In particular, he called for Korea to focus more on improving a training system for youths rather than artificially creating jobs in the public sector.
“Germany had high unemployment in the 1990s and early 2000s. Then they spent more on training to prepare workers to compete. They also froze wage increases for several years, until 2012 or so,” he said.
“The result has been a very low unemployment rate, a large trade surplus and even the absorption into the labor force of a large numbers of immigrants.”
Sohn Sung-won, an economics professor at California State University-Channel Islands, echoed the view, saying Korea needs to take a cue from Germany's vocational school system.
“More Korean youth should go to trade or vocational schools to learn a trade. Perhaps the government can provide both financial and nonfinancial incentives for young people to learn a trade instead of going to universities,” he said.
The experts said Korea should learn from Germany's efforts to increase flexibility and decrease duality in the labor market.
But they said Korea should be careful when emulating the German model because the European country has different social norms and labor relations.
“The German labor market has become more flexible over time. It is true that in some dimensions it is an example for other countries because in certain times it offers the necessary flexibility,” said Antonio Fatas, a professor of economics at INSEAD's Singapore Campus.
“But labor markets are very much related to a set of social norms and labor relationships that are not easy to change.”
He pointed out it is not easy for any country to just “imitate the German model,” so each market needs its own path for reform.
“Having said that, the Korean labor market suffers from strong duality _ insiders have strong protection, outsiders have very little,” he said.
In his view, this is not ideal because companies are not keen on hiring outsiders permanently so they are not willing to invest in them.
“This makes the outsiders marginal to the labor market; they have a hard time integrating,” he said.
“This is something we have seen in European countries and there is a strong emphasis to reduce duality. But it is not easy because the insiders oppose reform.”