[Issue] [January 2016] CCEJ Opinion : Where’s the reform? Concerns over the Saenuri Party’s labor reform bills

Where’s the reform?

Concerns over the Saenuri Party’s labor
reform bills

Ko Kye-Hyun

Secretary General


ⓒ Yonhap News

The revitalize the Korean economy, President Park has emphasized
the processing of her party’s 5 labor reform bills on consecutive days, more so
than saying it must be completed within the year. The 5 reform bills pushed by
the Saenuri Party, would revise the Labor Standards Act, the Employment
Insurance Act, the Industrial Accident Compensation Act, the Fixed-term Employment
Act, and the Dispatched Worker Act.

The 5 bills include changes that could drastically affect the labor
market and the lives of many workers. At the same time, the Korean economy is
currently losing jobs from small businesses as their capacity to grow through
domestic consumption is reduced. The economy is also squeezed by diminishing
household income due to income inequality. The only exception to this negative
growth pattern are a few large export-oriented firms. Thus, serious discussions
are required in order to confirm whether or not the 5 bills would actually have
their intended effect on curbing the vicious cycle and revitalizing the
economy. Yet, the President and her Party continue to emphasize the processing of
the bills, as if to rush them through. Since these bills include language not
consented to during the Tripartite talks, their actions raise suspicion over
their true intentions, perhaps even seeking to deceive the people by hastily
passing the bills rather than cautiously moving forward.

The majority party’s 5 revised labor bills allow for the general
dismissal of workers, and an extension of non-regular, contract jobs, from 2
years to 4 years, with the worker’s agreement. The bills also contain language
that extends the exception for the prohibition on dispatched labor to
technological processes at the root of manufacturing, such as casting, molding,
welding, surface finishing, plastics work, blanching and so forth.
Additionally, there are issues related to the cutting employment insurance for
low paid, short term contract workers, and with extraordinary extended working
hours, which is about normalizing legal working hours.


ⓒ Yonhap News

In 2013, the proportion of non-regular jobs in the Korean labor market was 22.4%, ranking 5th among OECD countries. More tellingly, the rate of transfer from non-regular jobs to regular jobs increased, going from 11.1% in year one, to 22.4% after 3 years. That is less than half of the OECD average of 53.8%. In this context, if the contract period can be legally extended by to 4 years, the number of non-regular jobs would increase drastically. To mitigate this problem, what is really needed is a policy allowing for temporary work to change to permanent work, or for proper compensation for equal work. However, the revisions in the bills only provide for an extension of time.


Because the bill revisions allow for dispatched employment for core technological skills need in manufacturing, the changes must be discussed carefully. Attention must be paid to the opinion that dispatching would disturb the accumulation of basic skills, which in turn could undermine the competencies of manufacturers who are already barely surviving. Core technologies are applicable to a vast array of industries, from shipping, to automotive, building & construction, aviation and IT. If dispatching employment is allowed for core technological skills, it could harm manufactures. In one recent report that monitored the Ministry of Labor and Employment, 538 out of 1,008 manufactures (53.3%) were found to have violated the law on dispatched employment. In light of such rampant violation, if legislation like these bills reduce short term costs for manufacturers, then in the long term, there would likely be a reduction in productivity and increase in industrial accidents due to lax safety requirements. With the current recession looming, manufacturing businesses are likely to find themselves unable to compete with opponents in places like China and elsewhere.

In sum, the Saenuri Party’s reform bills lead to more mass produced, non-regular jobs and spread them over and into manufacturing sectors. Considering the fact that the bills make general dismissal possible by changing the rules of employment, they are actually just promoting non-regular jobs and easy lay-offs. The Saenuri reform bills are in effect, labor weakening bills rather than labor reform bills. To call them labor reform bills is deceiving.


It should be highlighted that, unlike the Saenuri Party’s expectation of a revitalized economy, these bills could bring about the opposite result. Income inequality would grow even wider, non-regular jobs would increase, household incomes would decrease, and domestic consumption would decrease. That all leads to a shrinking domestic economy, taking us further away from revitalization. Only a few large exporting firms could expect to benefit. And even if the earnings of those firms grow, there will be no such trickle-down effect for small companies. The 5 reform bills would only aid the largest companies in operation.


Current economic policy of other countries like Japan, the US, and the EU, focuses on revitalization of their domestic economy by growing personal and household income. With this focus, it is almost impossible to make their economy worse and grow inequality among companies, individuals, and households. Nevertheless, President Park’s government has stuck with a policy that benefits only large firms rather than ordinary citizens and households. If it is possible to revive the economy in that way, people would have unlimited patience to withstand the pain it causes. The economy, however, could be worse off by easing restrictions, promoting real estate, and easing employment, all aspects familiar to the industrialization era. The government must effect a paradigm shift.


The majority party’s revised labor bills do nothing to reform the labor market or economy. Increasing non-regular jobs and dispatched employment weakens the roll of employment insurance as a social safety net, as well as the motivation of job seekers to be re-employed. The end result is likely to have a negative effect on the Korean economy by delaying improvements. If these 5 reform bills pass without any discussion and social consensus, it will be a dereliction of duty by the governing party and the National Assembly. It must be dealt with carefully, returning to the start and proceeding step by step, giving due consideration at each step.

Translator : Myung Jin-Geon