Recently, President Park Geun Hye says she needs “major surgery” on the Korean market.
South Korea is struggling to find solutions to an ailing labour landscape following sluggish economic growth.
Ms Park is pushing a revamp in labour laws that would be the biggest in nearly two decades. Its implementation would change the system of stable employment and seniority-based remuneration that was part of a social contract enforced by the unions and underpinned South Korea’s breakneck economic growth into the 1990s.
The changes include programs that will make it easier for companies to fire underperformers, have wages based on merit, shorten work hours, ease outsourcing rules and expand unemployment insurance.
She hopes to push labour reform legislation through the current session of parliament ending in December, but faces opposition from some unions and the main rival party.
In 2014, Japan faced similar fears. The Japanese Trade Union Confederation (Rengo) had opposed deregulation of the labour market because they doubted the direction of Abe’s structural reform program.
Fast forward to May 2015, Japan experienced a near-record 96.7 per cent of Japan’s new university graduates have found jobs this year in a sign of the country’s tightening labour market.
The rebound boosted Prime Minister Shinzo Abe’s standing. It appeared that his economic stimulus is working and thus giving companies the confidence to hire, and pushing the labour market closer to a point where wages start to rise.
In many countries, loosening up a rigid labor market is parallel with economic reforms. The cause of sluggish economies is attributed with too much government regulation.
Singapore has enjoyed a period of light labour regulation from day 1. With that, corporations found it easy to do business here and to flourish. Together with the businesses, the workers found a stable source of income. The economic landscape matured and in time, we laid the foundation to build a nation on.
It’s interesting to see how these days we’re calling for more regulation, more tightening and more legislation – the very reverse of what our regional counterparts are doing and the very opposite of what made us successful in the first place.
There is now a recession looming on the horizon. Industry experts are forecasting that our tightening on labour is not going to be sustainable but yet we have a populace that’s not open to foreign labour.
Will we become more protectionist as time goes by? Will our people learn from the mistakes that other countries have made?
Or will we become another has-been as time goes by?