Korea is taking baby steps toward reducing non-regular workers. About 97,000 public-sector workers will have their non-regular status converted next year. They will get the same treatment in bonus and welfare benefits as regular employees.
The government's symbolic gesture will be meaningless unless private companies do the same. The Federation of Korean Trade Unions complains it is not compulsory for private companies to follow suit. The Korea Employers Association says the government's recommendation will only make the labor market more rigid than before. It says companies will be reluctant to hire or relocate their plants overseas once they are forced to reduce the number of non-regular payrolls.
Private companies account for 96 percent of all non-permanent employees. Temporary employment accounts for 6 million, or 21.3 percent of all jobs, the fourth highest incidence in among OECD countries. An inclusion of workers at the subcontracting companies and the self-employed will hike the number to 17.5 million or 47.5 percent of all workers.
The OECD reported the average wage of non-regular workers was 45 percent below that of regular workers although their productivity gap was only 22 percent in 2009.
However long it may take to narrow their income gap, the country must take action. The increase of non-regular workers has been an obstacle to achieving social harmony, sustained economic growth and economic de-polarization.
There may be market-oriented solutions. One option is for companies to declare a moratorium on the number of these disadvantaged workers. The plan needs multi-year action plans to convert non-regular workers into regular personnel.
Second, relaxing employment protection and reducing the benefits of regular workers is necessary. Unionized regular workers must allow their non-regular counterparts to join the union. Unions should become a forum where members can devise ways of narrowing their income gaps.
Third, Korea could slash working hours of existing workers and increase part-time employees. In fact, Korean employees worked 2,193 hours last year, 440 hours more than the OECD average.
The government can do its part to encourage private companies to transform non-regular workers into regular payrolls. Korea's social spending accounts for 7.5 percent of the GDP ― the lowest among OECD member countries and well below the OECD average of 20 percent.
The government must reinforce its non-discrimination policy. It could give tax incentives to firms converting underpaid and discriminated workers into regular status. It can use tax incentives to encourage companies to increase training programs and subsidize social insurance payments of non-regular workers.
Removing the dualistic nature of the labor market is a key to reducing the income disparity.
Korea can use workfare as a cornerstone of its welfare policy. Using welfare budgets for creating jobs is necessary. This would encourage the jobless to search for even dirty, dangerous and difficult jobs. It is less costly to provide benefits to workers than to the jobless.