53% of Foreign Investment Firms Say Korean Labor Market Is Rigid

by Lee Dongwoo

Published 21 Jul.2024 12:14(KST)

More than half of foreign-invested companies in Korea responded that Korea's labor market is rigid.

The Korea Economic Association announced on the 21st that, according to a survey on perceptions of the Korean labor market conducted by Monoresearch from April 2 to 12 targeting 538 foreign-invested manufacturing companies in Korea with over 100 employees (100 companies responded), 53.0% of the responding companies answered that the Korean labor market is "rigid." Only 9.0% of companies responded that the Korean labor market is "flexible." The remaining 38.0% answered "average."

When asked about the level of labor regulations in Korea compared to major advanced countries such as the United States, Japan, and Germany, 47.0% responded that it is "high." Only 13.0% answered that labor regulations are "lower" than in major advanced countries, and 40.0% of companies responded that it is "similar." In a survey on overall perceptions of labor-management relations in Korea, 63.0% of responding companies evaluated them as "adversarial." Only 4.0% answered "cooperative," and 33.0% said "average."

On the 12th, employees of tenant companies are moving at the Korea Economic Association in Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

Additionally, when assuming Korea's labor-management cooperation level as 100, responding companies rated Germany at 124.8, the United States at 121.4, Japan at 116.2, and China at 89.7. Among major manufacturing competitors, all three countries except China were evaluated as superior to Korea in labor-management cooperation. 68.0% of responding companies stated that they consider labor environment factors such as labor-management relations and labor regulations in Korea important when establishing mid- to long-term business plans.

When domestic labor market flexibility improves to the level of the so-called major five countries (G5) ? the United States, Japan, Germany, the United Kingdom, and France ? responding companies also said they would increase their investment scale by an average of 13.9%. The Korea Economic Association analyzed that "Korea's rigid labor market and adversarial labor-management relations increase management uncertainty for foreign-invested companies, acting as significant risk factors when establishing business plans compared to other major countries."

Lee Sang-ho, head of the Economic and Industrial Headquarters at the Korea Economic Association, said, "Korea's rigid labor market and adversarial labor-management relations have long been pointed out as major obstacles to attracting foreign investment," adding, "Labor rigidity should be resolved through easing regulations on working hours and dismissals, and legislation on the amendment of the Labor Union Act, which could greatly exacerbate labor-management conflicts, should be avoided."