South Korea labour re­form push gains trac­tion

The Pak Banker - - BUSINESS -

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."

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