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Korea urged to fix labor market


Country competitiveness rises but labor market lags in global index


By Kim Bo-eun

Korea's overall competitiveness has grown, but its rigid labor market has remained a major stumbling block for the county to join the rankings of the top 10 global economies, according to a World Economic Forum (WEF) report, Wednesday.

In the 2019 WEF Competitiveness Index based on a survey of 141 countries, Korea ranked 13th, up two notches from last year. It placed 10th among the 36 OECD member states and fifth in the East Asia and the Pacific region, behind Singapore, Hong Kong, Japan and Taiwan.

But in terms of labor market factors, it was near the bottom.

For cooperation in labor-employer relations, Korea ranked 130th; Korea is known for its militant unions, especially in the auto manufacturing sector.

The country was 116th in redundancy costs, 102nd in hiring and firing practices and 100th in ease of hiring foreign labor. Redundancy costs refer to the cost of paying compensation to employees made redundant when a workforce is reduced.

Singapore, which topped the list of 141 countries in competitiveness, ranked No. 1 in cooperation in labor-employment relations.

Hong Kong, which ranked third in competitiveness, was No. 1 in hiring and firing practices.

"A major weakness is Korea's labor market, which is characterized by a rigid, de facto two-tier system of 'insiders', who enjoy permanent contracts and generous benefits, and precarious 'outsiders'; very low female participation by OECD standards; conflictual industrial relations; and relatively poor worker rights' protections," the report said.

Sung Tae-yoon, a professor of economics at Yonsei University, said, "There is a large discrepancy between the indices [of overall competitiveness and the labor market], which shows there is a problem.

"Policies are not helping, because they are heightening the rigidity of the labor market."

The Moon Jae-in administration's policies, such as changing irregular workers to permanent employees, are seen to have increased this rigidity.

The report also noted Korea's market inefficiencies.

"The weakest aspect of Korea's performance is market inefficiencies, due primarily to the lack of domestic competition and high trade barriers," the report said.

Meanwhile, Korea topped the list in ICT adoption, as well as macroeconomic stability.

Korea's ranking was also high in infrastructure (6th) including that of transport and utilities, as well as health and life expectancy (8th).

The report pointed out that Korea's "innovation ecosystem could be strengthened by encouraging entrepreneurship, which is currently undermined by cultural and sociological factors such as reluctance to change and high risk aversion, because of the stigma associated with failure, patriarchal corporate culture, and lack of diversity."

Korea ranked 88th in attitudes toward entrepreneurial risk.

Following Singapore in the competitiveness ranking were the U.S., Hong Kong, the Netherlands, Switzerland, Japan, Germany, Sweden, the U.K. and Denmark.

The competitiveness report ranks countries based on indices on the function of government, infrastructure, ICT, macroeconomic stability, health, skills, markets, financial system and businesses.



Country competitiveness rises but labor market lags in global index


By Kim Bo-eun

Korea's overall competitiveness has grown, but its rigid labor market has remained a major stumbling block for the county to join the rankings of the top 10 global economies, according to a World Economic Forum (WEF) report, Wednesday.

In the 2019 WEF Competitiveness Index based on a survey of 141 countries, Korea ranked 13th, up two notches from last year. It placed 10th among the 36 OECD member states and fifth in the East Asia and the Pacific region, behind Singapore, Hong Kong, Japan and Taiwan.

But in terms of labor market factors, it was near the bottom.

For cooperation in labor-employer relations, Korea ranked 130th; Korea is known for its militant unions, especially in the auto manufacturing sector.

The country was 116th in redundancy costs, 102nd in hiring and firing practices and 100th in ease of hiring foreign labor. Redundancy costs refer to the cost of paying compensation to employees made redundant when a workforce is reduced.

Singapore, which topped the list of 141 countries in competitiveness, ranked No. 1 in cooperation in labor-employment relations.

Hong Kong, which ranked third in competitiveness, was No. 1 in hiring and firing practices.

"A major weakness is Korea's labor market, which is characterized by a rigid, de facto two-tier system of 'insiders', who enjoy permanent contracts and generous benefits, and precarious 'outsiders'; very low female participation by OECD standards; conflictual industrial relations; and relatively poor worker rights' protections," the report said.

Sung Tae-yoon, a professor of economics at Yonsei University, said, "There is a large discrepancy between the indices [of overall competitiveness and the labor market], which shows there is a problem.

"Policies are not helping, because they are heightening the rigidity of the labor market."

The Moon Jae-in administration's policies, such as changing irregular workers to permanent employees, are seen to have increased this rigidity.

The report also noted Korea's market inefficiencies.

"The weakest aspect of Korea's performance is market inefficiencies, due primarily to the lack of domestic competition and high trade barriers," the report said.

Meanwhile, Korea topped the list in ICT adoption, as well as macroeconomic stability.

Korea's ranking was also high in infrastructure (6th) including that of transport and utilities, as well as health and life expectancy (8th).

The report pointed out that Korea's "innovation ecosystem could be strengthened by encouraging entrepreneurship, which is currently undermined by cultural and sociological factors such as reluctance to change and high risk aversion, because of the stigma associated with failure, patriarchal corporate culture, and lack of diversity."

Korea ranked 88th in attitudes toward entrepreneurial risk.

Following Singapore in the competitiveness ranking were the U.S., Hong Kong, the Netherlands, Switzerland, Japan, Germany, Sweden, the U.K. and Denmark.

The competitiveness report ranks countries based on indices on the function of government, infrastructure, ICT, macroeconomic stability, health, skills, markets, financial system and businesses.


Kim Bo-eun bkim@koreatimes.co.kr


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