South Korea labour reform push gains traction
SEOUL: Hyundai Motor has become the latest company to join South Korea's efforts to reform its rigid labour market as President Park Geun-hye tries to jump-start the stagnant economy through structural reforms. The country's biggest carmaking group said on Tuesday it would introduce a wagepeak system from next year for its 150,000 employees in the country as its response to "a social need for creating jobs for the youth and stabilising employment conditions". Under the system, workers aged 56 and above will receive lower wages each year in return for an extended retirement age of 60.
The wage peak system, designed to make it less expensive to retain older workers, is one of the main pillars of the government's labour reform drive. Nearly halfway through her single five-year term, Ms Park has put the labour market at the heart of structural reforms across the financial sector, public institutions and education. The president is also keen to make it easier for companies to sack workers. Economists see the country's rigid labour market as a threat to its competitiveness. Ms Park has stressed that a more flexible labour market would help create jobs for young people. As South Korean companies grapple with high wages and low productivity amid a slowing economy, the country's youth unemployment hit a 16-year high of 10.2 per cent in June, compared with an overall jobless rate of 3.9 per cent.
"Labour reform is all about creating new jobs," Ms Park said in a televised speech last week. "Without overhauling the sector, we cannot save young Koreans from despair and resolve the pain of irregular workers."