Labor reform

Labor Reform, the way forward

1. Background

  • There is a need to address issues arising from dual structure and polarization of the labor market which has surfaced in the course of Korea's rapid economic growth*.

    * Per capita national income has increased from $100 in 1960 to $30,000 in 2019.

  • The gap between large and small companies, contractors and subcontractors, and regular and non-regular employees has been widening*.

    * If the wage of regular workers at a company with 300 employees and more is 100, the wage of non-regular workers at a company with fewer than 300 employees is 45.6.

  • In addition,the economy is experiencing labor shortage with the total and working age population rapidly decreasing since 2021*.

    * Population changes(in millions): (2017) 51.362 → (2018) 51.585 → (2019) 51.765 → (2020) 51.836 → (2021) 51.745

  • While new younger workforce may eventually enter the labor market, a careful consideration needs to be given to them because unlike the current generation, they are more oriented towards "fairness" demanding rewards for as much as they work while expressing strong dissatisfaction with unreasonable treatment

  • Higher labor cost due to the strongest seniority-based wage system among the OECD countries tend to increase job insecurity for middle-aged workers. This affects to decrease business productivity and motivation of individual workers.

  • Job polarization is expected between high-income professional job and manual labor due to "job transformation" caused by the Fourth Industrial Revolution.

  • Under these circumstances, labor reform to seek

    (1) establishing the rule of law in labor relations;

    (2) protecting the vulnerable by reducing duality;

    and (3) modernizing labor standards, is an essential task in order to build a sustainable labor market of mutual benefit and solidarity for the current and future generations

2. Establishing the rule of law in labor relations - to prevent unnecessary on-site disputes and conflicts

  • In order to increase transparency in the operation and accounting of labor unions, the Government took measures in January 2023 to require unions to conduct a self-monitoring of their operations and submit the results of keeping and maintaining account books.

  • The Government imposed fines and conducted on-site verifications on labor unions that violated their obligations to keep and maintain account books or refuse to explain whether they have fulfilled their obligations.

  • To enable democratic control of financial management by union members, the government is promoting legal and institutional improvements such as enabling union accounting disclosure, enhancing the professionalism and independence of auditors, increasing union members' right to access, and expanding the grounds for audits.

  • The Government supports replacement of the current Hiring Procedure Act with the new Fair Recruitment Act, so that coerced and unfair recruitment can be prohibited and the provision of recruitment information expanded.

  • In order to eradicate illegal acts at construction sites, the Ministry of Employment and Labor, the Office for Government Policy Coordination, and the Ministry of Land, Infrastructure and Transport has established a cooperative system for investigations and law enforcements and strictly respond by strengthening intensive check of guidance and ex officio investigations, especially to coerced recruitment.

  • The government is working to eradicate five major illegalities and irregularities in the labor market, including the misuse of blanket wage system, overdue wages, unfair labor practices, unfair recruitment, and workplace harassment.

  • In particular, a strategic inspection was conducted from January to March 2023 to eradicate illegal wage payment practices such as the misuse of blanket wage system and fixed overtime that causes unpaid overtime work, and measures to improve the system are going to be established in the first half of 2023.

3. Addressing the labor market dualism - to protect the vulnerable

  • In order to address labor market dualism in shipbuilding industry, a joint mutual growth consultative group comprising principal contractors, subcontractors and experts was formed to sign a win-win agreement in shipbuilding industry on February 27, 2023

    A new win-win model was proposed, where contractors and subcontractors come up with solutions by themselves while the government supports their implementation, including minimizing the compensation gap between contractors and subcontractors, reforming into a skill-based wage system, introducing an escrow system, and minimizing re-subcontracting

  • To underpin the implementation of the agreement, the Government announced a win-win package support plan on March 8 to provide financial and institutional support ranging from skills training, employment service, increased benefits for both the contractors and subcontractors, and improved occupational safety measures on the condition of full implementation.

  • To spread the win-win model in shipbuilding industry, the Government plans to meet with contractors, subcontractors and experts in other industries beginning in the second half of this year to explore possibilities for an agreement and build a win-win model for them.

  • A win-win wage committee was formed on February 2, 2023 and has been discussing policy and institutional measures to reform the wage system and reduce wage gap.

  • In June, the Government plans to draw up and announce measures to address the dual structure of the labor market, including labor, industrial, and welfare policies.

  • By the end of 2023, the Government plans to complete building of an integrated wage information system that combines wage information and jobs that can be utilized in the workplace, such as in the case of the U.S. and Japan

    Job and wage information is provided for about 930 occupations in the U.S. and about 500 occupations in Japan.

4. Modernizing labor standards - to ensure the global competitiveness of the Korean economy

  • The government is working to reform working hours to respect workers' right to choose and to protect health rights.

  • The government announced the legislation of an amendment which contains reform plan in March 2023 and plans to gather and apply opinions intensively through public surveys and Focused Group Interviews in the future to increase acceptance and build consensus.

  • The Economic, Social and Labor Council (ESLC) has been discussing measures to protect workers of new types of employment through expert-led advisory and research groups since February 2023.