CEO 칼럼

발행년도 2017년 7월
제목 Irregular jobs

Since his inauguration of President Moon Jae-in, he visited「Incheon International Airport Corporation」 as his first official schedule and where he declared that he will make "Age of zero irregular employment at public institutions". Furthermore, he is also eager to spread this irregular worker policy to general private enterprises. On the surface, it seems quite nice to hear and would be a reasonable decision that mitigates feeling of relative deprivation driven by regular and non-regular worker's wage gap or labor condition discrimination(?). Public services are directly related to what our public pays for taxes, so the policy of turning the non-regular into the regular should have discussed before it is acted. President Moon, however is forcing this policy coercively, so it will bear negative effect after all. As far as I see, public services should achieve their competitive advantage through core business unit revolution, but this policy is based on the principle that directly hires cleaning, security or doing-simple and repeated work employees, resulting in business inefficiency without any further ado.



The average labor cost per capita in public enterprise is KRW 68 million a year, more than twice the national average income per capita. Furthermore, due to high performance bonus, these public enterprises are usually called "Heaven's job". Therefore the policy of job status conversion from non to regular including doing simple occupation will make countless side effects. Also, Rho Moo-Hyun, 16th South Korean president and represented as Participatory Government, had the importance on 「to get rid of irregular employment」and enacted 「non-regular worker protection law」 since July 2007. Even so, the number of non-regular employees actually increased from 5.7 Million to 6.5 Million, which shows the policy making only does not guarantee the actual problem to be solved.

According to the experts, the first reason for increasing non-regular job workers is 「Redundancy Dismissal Law」that is introduced by former President Kim Dae-joong and that made regular job employee's layoff "a piece of cake" and that overprotects them. Accordingly, the labor unions in big corporations have strong power, leading to the hardest country to lay off people among OECD countries.



Secondly, due to over protection for the regular workers such as 「salary based on working years」that is rarely related to productivity, it has been harder to make new recruits. Therefore it leads to a number of non-regular employees and un-employment of young people. "Age of zero irregular employment at public institutions“ run by taxes may be "Oasis" only for a few employees, it should never be a fundamental solution when considering the future of our country.



President Moon, as implementing his presidential election pledge, installed "job bulletin board" consisted of 18 job-related-indicators; the number of people employed, youth unemployment rate, wage gap, working hours and etc. He insisted "job policy” be the best growth and welfare strategy that lessen the gap of economical inequality. Also he believes the current situation is too worst to let the market economy work alone, so he is willing to speed up making jobs from public sector, no matter how strong and conflicted the public opinions are. Rather than reforming the public sector that is full of corruption, the government is likely to make the economical situation worse. Also making more jobs in public sectors leads to "공시생 열풍" which is described as a social trend of studying exam for public officer. If they are not able to be the public officers, however, they would feel the relative deprivation, and of course job polarization would be even worse. When potential competent workforce focus only on the exam for public officer, they are soon to be included in economically non-active in the short term, and it is likely to deprive of Small and Medium Business's (SME) potential growth power in the long term.



Although the solution most countries succeed in terms of unemployment rate problem is that they used start-up that led to economic growth and to raise work force, our country is doing the opposite. So what the government has to do is not to increase public sector, but to make some space where companies can invest more. The government has to revisit the tax rate increase, stiff labor market or company regulation enforcement, in order to minimize the jobs transferring overseas. While Korean companies hired over 1.1M workers overseas, for the last 10 years, foreign investment's did only about 70K workers, which means almost 1M jobs were deprived to overseas.



The case of Germany shows the good example of the labor market reformation that can create millions of jobs and it would be the first thing the government has to do.


In 1990, Germany faced huge economic crisis right after the west and east Germany had unified that resulted in 5M unemployed. In 1998, the Schroeder, the prime minister of Social Democratic Party, succeeded in reforming the labor market by the government alone, after failing to reform the labor through 「the Labor-Management committee」.

By liberalizing dispatch labor and deregulation of the labor market, we have increased the number of jobs, reduced unemployment-related benefits, brought the unemployed to the labor market, and succeeded in reforming the labor market by introducing a short-time work system such as a mini-job.

Schroeder, who visited Korea in 2015, once emphasized that "Labor market reform should not give decision makers such as workers and users decision. The elected government has legal authority over labor reform, so this is what politics do."

Countries like the United Kingdom, New Zealand, Ireland and Germany experienced favorable economy after labor market reformation and it says many things to us. Labor committee made since 1998 have had no progress as they refused to take part in and kept political fight externally. Therefore, it seems that the politicians in Korea are ruining the economy, and they are eliminating jobs.



Dong-hun Park, Chief Executive Officer of Renault Samsung Motors said in a news article that "With the export green-signaled, the need for factory expansion keep raised, and the exporting quantity may fluctuate depending on the global market changes and marketing strategies. However it is possible to recruit more people due to the factory expansion and the exporting quantity increase, it is not easy to dismiss the people already recruited when the sales quantity fell." European countries usually have flexible labor market, we have countless irregular worker issue and have stiffed labor market, so most companies in Korea hesitate whether to invest or expanse more, or reserve the plan.



When it comes to "non-regular worker zero" policy, the business circles are concerning more deeply. This is because there are even no government level guidelines for converting non-regular to regular worker, and the government is reminding people in a way that "regular is good, and non-regular is bad".

Legal definition of non-regular workers is ①temporary worker by contract and as such ②part-time worker ③non-specified worker such as service worker only, but calculated in the different ways from research companies. For instance, the top 4 Korean conglomerates' (Samsung, Hyundai, SK and LG) 54 subsidiaries listed on the stock market hired only 3.4% of temporary workers out of the total employees, according to 1Q financial statements, meanwhile the rate of non-regular workers calculated by labor circles indicated 31%, which is ten-fold higher. This is because the labor circles classify the people contracted as permanent but non-regular workers, dispatched workers, and subcontracted workers as non-regular workers as long as they show up in work place, while the companies do not count in that way.



It is a common misconception that the wage of non-regular workers is almost a half or two-third of regular workers. The wage level in a car manufacturing big company, for instance, indicated 61% compared to regular workers. When inspecting precisely, regular workers should have better wages because they firstly have more services years and gender, age and educational status also influence in the wages. In the case of SMEs, which has 95% irregular worker rate, the wage level is almost similar only by 4.3% according to the research by Korean Ministry of Employment and Labor. Therefore regarding irregular worker as low wage is absolutely nonsense.

Most of irregular workers also voluntarily decide to be the irregular, due to working conditions, parenting or household duties, which consists of 57% out of total irregular workers. Some people also wish to work without any regulation and interference by company, and people who wish to do voluntary part-time job because of work age limit after retirement should not be regarded as the one considered to be transferred into regular workers.



In summary, making public sector fill in regular workers leads to increase of wage and pension burdensome to government finance, and converting the irregular into the regular by force also leads to lessen new recruits fundamentally. Therefore this non-regular worker issue has to be discussed among government, company and labor circle in the long term and macroscopic point of view, and has to be resolved with considering labor market flexibility and performance based annual salary settlement.



Through 24 years of salaried man experience and 20 years of business management, what I believe the most crucial like goldsmith is "to all outsource except core business in order to succeed in company and organization". That is why I feel personally confused because government force me to hire all the non-regular as regular worker. I still hope president Moon. be successful, but I do not agree with the idea of 「making 810k jobs in public sector」, 「irregular job zero」, 「minimum hourly wage 10,000 by the year 2020」, and 「abolish annual salary based on performance」



It is impossible to deny that "democracy is equality of opportunity, not equality of results". For Korea which has no natural resources the only way is to export... The ruling powers should bear in mind that the loss of competitiveness towards foreign market results in falling into the bottomless pit.


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