Value context and insight. lkm@koreatimes.co.kr
Korea's pandemic containment, economic support measures lauded by OECD
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By Lee Kyung-min
Wide disparities between regular and non-regular workers a major sticking point
By Lee Kyung-min
Korea's balanced response to the COVID-19 pandemic limited the damage to the economy and people's livelihoods, underpinned by early and decisive testing, tracking and treatment, which helped the country avoid a full lockdown, a report jointly released by the OECD and Korea Development Institute (KDI) said Tuesday. The OECD is short for Organization for Economic Cooperation and Development, a group of 37 high-income countries.
Korea's export-reliant economy has played an important role for other peers around the world as a leading producer of medical test kits, despite its vulnerabilities to disruption in the global value chain (GVC).
Strong and rapidly implemented fiscal and monetary policy measures designed to support households and businesses helped the Korean economy suffer far less contraction compared to other OECD economies in 2020.
Yet the labor market being disrupted by reduced working hours, job losses and the enforced shutdown of some businesses remain key challenges to be countered via better utilizing women as well as young and old workers, thereby building a more inclusive economy and society.
The rise in Korea's unemployment rate has remained modest from the onset of the crisis ― from 3.3 percent in February to 4.5 percent in May 2020. But the low participation of women in the workforce can delay labor market recovery.
In a report entitled, “Inclusive Growth Review of Korea: Creating Opportunities for All,” the OECD said that Korea's supplementary budgets, of which about 70 percent is debt-financed, and which amount to about 3.5 percent of the annual GDP, promptly provided resources for the health sector, loans to small- and medium-sized enterprises (SMEs) and emergency support for households as well as severely hit industries and workers.
“The projected contraction in the gross domestic product (GDP) in 2020 is considerably milder than in other OECD countries. The real GDP in Korea is projected to decline by 1 percent in 2020 and to grow by 3.1 percent in 2021. This milder contraction is compared to a projected fall in the global GDP of 4.5 percent in 2020 and 5 percent in 2021,” the report said.
The uneven labor market impact of the COVID-19 crisis may exacerbate large income disparities already pronounced in Korea, a growing concern mitigated in part by government measures to retain employment. These measures include emergency subsidies to all households, relief checks ― otherwise known as emergency disaster relief payments ― to vulnerable, low-income workers and increased subsidies to firms for retaining workers.
These measures together with other efforts to strengthen social protection and ease labor market regulations, the report said, will promote the effective reallocation of workers once the health crisis is overcome, a key step towards reducing labor market duality. Labor market duality is a chronic problem in Korea defined by wide disparities in wages, working conditions and job security between non-regular workers and regular workers, despite the similar work they perform.
“As in many OECD countries, the unemployment rate increase has also disproportionately affected non-regular workers. Self-employed, temporary and part-time workers, for example, account for up to 40 percent of employment in the most affected sectors,” the report said.
The broad challenge of reducing labor market duality in Korea in the long-term requires a multi-pronged approach, including the need to address lagging productivity in the service sector and in SMEs.
“Breaking down dualism requires a comprehensive strategy that should encompass relaxing employment protections for regular workers and making them more transparent, while increasing social insurance coverage and training for non-regular workers,” it said.
Among the ways to support women as well as young and old workers are well-tailored job counseling and vocational training.
Women's return to work, the report notes, should be facilitated without devaluation of their skills following any leave of absence, mostly due to child birth and rearing.
Firms can increase work time flexibility and keep the pay grade of part-time workers similar to that of workers on full-time regular contracts. These measures can bolster labor productivity while tackling the low birthrate.
As for young people, career guidance education from training counselors is needed for them to better incorporate career-relevant material in all subjects.