Innovative businesses have been showing negative view towards South Korean Government’s policies on employment for the past two years. Due to sudden increase in minimum wage, it has become a financial burden for them to even hire one person. Telling us not to hire an employee if we cannot even pay him or her is same as asking if a chicken or an egg comes before the other. It is illogical for a venture business to hire someone after guaranteeing salary first when a business is able to pay its employees through profits it makes. It is also burdensome for innovative businesses when they think about implementation of 52-hour work week system as they have yet to make any preparation to implement this system. Although South Korean Government states that this system will be applied gradually depending on business size, there are doubts on whether venture businesses are able to implement this system when major corporations or medium-sized businesses are also having difficulties implementing this system. Venture businesses chose tight employment policies that make them difficult to hire people and not able to work freely as an impediment to innovative growth.
◊Growing negative views towards South Korean Government’s policies on employment
After The Electronic Times and Korea Venture Business Association (KOVA) performed a survey as this month marks two years of South Korean Government led by President Moon Jae-in and asked businesses about effects of South Korean Government’s policies on employment, 52.7% of them answered by saying they have very or somewhat negative views towards employment policies. 27.8% of them responded by saying they have very negative views towards employment policies which was the highest percentage out of all answers.
Towards same question that was asked during last year’s survey, 44.2% of them answered by saying they have negative views towards current employment policies. More than half of responders had negative views during this year’s survey. This indicates that there is a growing number of businesses that have negative views towards current employment policies.
29% increase in minimum wage within a span of two years has brought financial burden for small businesses and self-employed businesses and small and medium businesses and such increase has led to lower employment rate. Regarding this issue, President Moon stated during his New Year press conference that employment index not meeting expectations of people in South Korea was the most hurtful thing to him.
Although South Korean Government started modifying its policies on employment through income-led growth, innovative growth, and fair economy, its attempt met a headwind due to problems regarding effectiveness of income-led growth policy and increase in minimum wage and enforcement of 52-hour work week. It saw poor results in job creation and income distribution that have been emphasized the most by President Moon.
Number of employees only increased by 97,000 people in 2018 which was the lowest in the past 9 years. Unemployment rate in 2018 was 3.8% which was the highest since 2001 (4.0%).
Difference in income between upper 20% class and lower 20% class in fourth quarter of 2018 was the highest since such statistics began in 2003. While income of lower 20% class decreased by 17.7%, income of upper 20% class increased by 10.4%.
“It is hurtful to me to see that there is instability in employment for people who are in their 40s due to a downward trend in employment within manufacturing industry and wholesale industry. Conditions for classes with low income are still having difficult times.” said President Moon during a cabinet meeting that took place on the 30th of April.
Although President Moon has been emphasizing on employment as he set up an ‘employment committee’ under him as soon as he was appointed as the president and installed a screen inside of his office to check current status of employment, some say that he actually did not succeed in employment policies.
◊Venture businesses request for gradual application of 52-hour work week system
42.6% of businesses want ‘gradual application depending on types of businesses and sizes of businesses’ when it comes to supplement measures that are needed the most for venture businesses regarding 52-hour work week system. Expanded flexible work system period (20.4%), expanded application of selective work system (19.4%), and grace period (14.1%) followed ‘gradual application’.
Regarding ‘effects of expanded period of flexible working hour system on venture businesses’, which is being discussed by South Korean Government and The National Assembly, 39.2% of responders had positive response surpassing percentage of negative responses (23.8%). 45.6% and 30.4% of responders answered by saying that one year and six months are appropriate period of flexible work system respectively. 24.0% of responders answered by saying they want to maintain current 3 months period. As a result, most businesses agree that there needs to be improvement to flexible work system.
Venture businesses stated that there needs to be supplemental measures for flexible work system in order for South Korean Government to implement 52-hour work week system. They mentioned that autonomy needs to be guaranteed regarding flexible work system. They are indicating that South Korean Government should not force flexible work system, but have flexible work system managed through agreement between labor and management.
They also stated that there needs to be exceptions regarding 52-hour work week system. 52-hour work week system is meaningless for software businesses and small businesses and it is not enough for businesses that are trying to run new businesses.
They argued that different minimum wages should be set depending on fields and sizes of businesses as increased minimum wage can lead to increased production cost and worsened competitive price. Some also point out that South Korean Government should consider correcting its policies on employment to resolve insecurity by small and medium businesses and venture businesses regarding employment.
However, there has yet to be any sign by South Korean Government about fixing its policies on employment. South Korean Government is looking into deciding amount of minimum wage for 2020 through same method after it requested review of 2020 minimum wage from Minimum Wage Commission about a month ago and has been waiting revision of Minimum Wage Act that has been delayed within The National Assembly. South Korean Government’s plan of adjusting speed of minimum wage increase by changing how minimum wage is determined has gone wrong.
Staff Reporter Ham, Bongkyun | hbkone@etnews.com