The Koreas

Concerns Rise Over South Korea’s Dual Labor Market

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The Koreas

Concerns Rise Over South Korea’s Dual Labor Market

Public sector contract workers went on strike to protest their unequal status — and uneven government progress on the issue.

Concerns Rise Over South Korea’s Dual Labor Market
Credit: Pixabay

Thousands of South Korean public sector contract workers went on strike for three days last week, holding signs calling for “a world without temporary work.” While the protesters have since returned to their jobs, more strikes are lined up this summer as many contract employees are becoming increasingly disaffected with President Moon Jae-in’s efforts to improve their livelihoods.

Around 52,000 nonregular government employees associated with the Korean Confederation of Trade Unions (KCTU) took part in last week’s demonstrations across the country, the largest on record according to the Ministry of Education. Most came from primary and secondary schools, paralyzing about 44 percent of school cafeterias, with others working low-paying jobs across various public institutions. Protesters demanded a pay increase of 6.24 percent, up from the Ministry of Education’s proposed 1.8 percent raise. Workers were also looking to hasten the process of switching to the regular government payroll, which carries much greater privileges.

South Korea’s dual labor market of permanent and contract workers isn’t just a public sector issue. In 2018, one-third of all employed South Koreans were working on a temporary basis. Compared to regular workers, nonregular employees receive significantly lower wages. Data from South Korea’s Ministry of Employment and Labor show that contract workers in the country’s large multinational conglomerates only earn 65 percent of what their regularly employed counterparts make for doing much of the same work. Contract workers also generally face limited benefits, job security, and career advancement opportunities. These positions further tend to be occupied by otherwise constrained socioeconomic groups such as people from disadvantaged backgrounds and women. Of the 6.6 million temporary South Korean workers in 2018, 55 percent were women.

Taken altogether, the dual labor market is a significant contributor the country’s growing income inequality problem. In the latest available data, South Korea ranks 31st among the 35 OECD countries in income inequality. A recent report issued by the Korea Labor Institute additionally found that the top 10 percent of earners accounted for half of the country’s total income, which is among the highest in developed economies.

Moon was elected over two years ago largely because of his platform to address socio-economic inequality, including promises to address some of the underlying causes in the domestic labor market. By the end of his term in 2022, Moon pledged to create 810,000 public sector jobs, most of which would come from converting temporary employees to permanent ones. Through this and other complementary measures in the public sector, the administration hoped to pressure private companies to follow their lead. Despite continued efforts toward this end, the share of irregular workers has grown slightly under Moon, continuing a trend preceding his time in office.

Due to unresolved issues with the dual labor market as well as concerns with underwhelming total job growth last year and a slower than planned minimum wage hike, the KCTU is planning a general strike among its nearly 1 million members on July 18. The administration for its part has been sympathetic to the labor union demands, but has blamed the inability to provide more support on the lack of a sufficient budget from the National Assembly – a frequent complaint.

The opposition Liberty Korea Party is ideologically opposed to many of Moon’s policies, but one of the most contentious areas is government-funded job creation initiatives. These policies proved to be highly controversial in passing the 2018 and 2019 government budgets in the National Assembly. To ultimately get funding approved, Moon’s Democratic Party made significant compromises on these programs both years. A 6.7 trillion won ($5.7 billion) supplementary budget, which would include more support for jobs, is also currently being held up by the opposition party in National Assembly, to the consternation of the Moon government.

Further public spending alone, however, won’t be enough to fix South Korea’s labor market. Building consensus among not just political leaders, but between labor groups and the business community regarding what the path forward should be is just as important. This is needed to address other important factors of labor market reforms such as building a complementary legal framework and proceeding amid low labor productivity. This isn’t an easy task, though it’s a necessary one considering the scope of the issues resulting from South Korea’s dual labor market.

Kyle Ferrier is the Director of Academic Affairs and Research at the Korea Economic Institute of America (KEI) and a contributor to The Diplomat’s Koreas blog.