The Harsh Reality of a Rigid Labor Market: "Employment, Dismissal, and Reemployment Are All Difficult; Hiring Hesitation Persists Despite Workforce Needs"

Korea Employers Federation Announces Results of Corporate Survey on Labor Market Flexibility and Stability

[Asia Economy Reporter Kim Hyewon] In South Korea, it was evaluated that the overall labor market flexibility and stability fall below average, with difficulties in workforce adjustments such as employment and dismissal, and low reemployment prospects after job loss. Legal and institutional factors that prevent individual dismissals or flexible working hours adjustments were pointed out as hindrances to flexibility and stability.

On the 31st, the Korea Employers Federation conducted a corporate perception survey on labor market flexibility and stability targeting 525 companies with 30 or more employees (based on responses). The results showed that responding companies perceived both the flexibility and stability of the Korean labor market as low.

In this survey, which divided labor market flexibility and stability into types, the perceived score by responding companies was lowest for "ease of workforce adjustment such as employment and dismissal (external numerical flexibility)" (2.71 points) among labor market flexibility factors, and "quick reemployment possibility after job loss (employment stability)" (2.71 points) among labor market stability factors. The perception score was derived as an average value on a 5-point scale, where 'very low' is 1 point, 'low' 2 points, 'average' 3 points, 'high' 4 points, and 'very high' 5 points.

The perception scores for all types of labor market flexibility and stability were below the median value of 3.00 points, indicating that responding companies generally evaluated both the flexibility and stability of the labor market as low.

Looking at the perception scores by type of labor market flexibility, responding companies rated "ease of workforce adjustment such as employment and dismissal (external numerical flexibility)" the lowest at 2.71 points. This was followed by "ease of wage adjustment (wage flexibility)" at 2.78 points, "ease of working hours adjustment (internal numerical flexibility)" at 2.80 points, and "ease of job adjustment and reassignment (functional flexibility)" at 2.85 points.

Companies with labor unions had lower perception scores for all types of labor market flexibility compared to companies without unions. This suggests that companies with unions perceive the labor market as more rigid.

When companies that responded that labor market flexibility is low were asked about the reasons, the answers mainly pointed to "legal and institutional factors." They responded that individual dismissal due to disciplinary action or poor performance is difficult (53.7%), flexible working hours adjustments such as the uniform 52-hour workweek system are difficult (51.2%), it is difficult to reform the wage system to be job- or performance-based (32.7%), and there is a lack of systems to improve job skills for reassignment or job adjustment (30.8%).

Among companies that responded that labor market flexibility is low, the most frequently cited impact of low labor market flexibility on workforce management was "hesitation to hire new employees even when there is demand for manpower" (40.6%). This was followed by "difficulty in improving productivity and overall decline in organizational vitality" (35.5%), "preference for non-regular or outsourced workers over regular employees when hiring" (33.5%), "no significant impact on workforce management" (23.3%), and "reluctance to extend employment of older workers who receive high wages compared to productivity" (22.7%).

Regarding perception scores by type of labor market stability, responding companies rated "quick reemployment possibility after job loss (employment stability)" the lowest at 2.71 points, followed by "possibility of securing stable income after job loss (income stability)" at 2.73 points, and "possibility of work-life balance (combination stability)" at 2.84 points.

Smaller companies (30?299 employees) perceived "income stability" as low, while larger companies (300 or more employees) perceived "employment stability" as low. Larger companies tended to perceive "combination stability" more positively.

When companies that responded that labor market stability is low were asked about the reasons, they cited "lack of systems" and "rigid organizational culture" respectively.

Lee Hyungjun, Head of Employment and Social Policy at the Korea Employers Federation, pointed out, "It is urgent to ease excessive protection of regular workers, reconstruct the current employment service system so that people can work anywhere they want and be rewarded based on the value and performance of their work, and enable quick reemployment even after job loss." He added, "Since many answered that they hesitate to hire new employees when perceiving the labor market as rigid, expanding labor market flexibility is also an important issue for solving youth unemployment."

This content was produced with the assistance of AI translation services.