The reform bill over irregular workers proposed by the ruling Grand National Party hit a snag as opposition Democratic Party lawmaker Choo Mi-ae "successfully" obstructed its passage through the parliament. Choo, who chairs the parliamentary Environment and Labor Committee said that there had been no massive lay-offs over the first five days since the two-year protection granted by the original law expired, although the government and ruling party pushed for the extension, spreading rumors that one million irregular workers would lose their jobs. 

An en masse dismissal

Are Choo's claims true? The Labor Ministry announced on July 10 that a total of 3,827 irregular workers had been fired since July 1. Meanwhile, only 1,433 contracted workers were offered a full-time job, leaving 72.8 percent of those subject to the expiry of the legal safeguard out of employment. The layoff ratio is pretty high but it's an exaggeration to call it as a mass dismissal when less than 4,000 irregular workers have lost their jobs. Such a view stems from the misunderstanding of the irregular workers' law. 

Then why didn't the much-feared massive layoffs take place? The law, effective since July 1, 2007, does not force companies to dismiss or upgrade an irregular worker to full-time status after the 2-year contract expires. The law applies to those who have worked more than 2 years under the contract signed, renewed or extended after July 1, 2007. 

Let's take an example of an irregular worker who signed a one-year contract on January 1, 2007 and renewed the contract the next year. Since the first date of his current contract is deemed as January 1, 2008, his employer has to decide whether to hire him as a full-time worker in 2010. His past contracts do not count here.

Then, this is only the beginning of an en masse dismissal. A few thousands of irregular workers were fired so far this month since about 5,000 workers or so have ended their two-year terms. By July 1, 2011, all of the current contracts are to expire, leaving all irregular workers at a critical juncture to be fired or offered a full-time job. How many people would be transferred to the full-time positions and how many would lose jobs? Based on the current transfer rate of about 30 percent, about 4.2 million out of 6 million irregular workers would be fired. This is apparently a major crisis and really a catastrophe. 

The disaster is inherent in the original text of the irregular workers' law. South Korea is rated 12th or 13th on the top list among 134 counties in terms of higher education and training, according to the global competitiveness ranking by the World Economic Forum. In contrast, it ranks 108th in firing cost, 95th in labor-management cooperation, and 65th in labor market rigidity. The nation's hard-line and violent labor unions, including the Federation of Korea Trade Unions, are well known worldwide.

Inherent problems

Under the circumstances, the irregular workers' law, which has enhanced the labor market rigidity, has a number of inherent problems. The attempts to regulate the economic phenomena with legal boundaries have always existed around the world but most of them failed. A policy against the natural trends often produces unintended consequences. As a wartime government attempt to control prices led to shooting prices by fostering black markets without exemption, the labor policy with "good intention" to turn irregular workers into full-timers has produced unintended consequences of dismissals and unemployment. 

Employers are well aware of the fact that full-time workers are better than part-timers for the company if the employment terms are similar. Irregular workers have higher turnover ratio and lower productivity. However, companies hire part-timers because there are benefits well offsetting the demerits. 

It's labor flexibility and cost savings. At the age of globalization with both capital and labor fast moving across national borders, companies have carried out occasional restructuring and overhaul to survive the cut-throat competition in the global market, which needed a very flexible labor market. To secure price competitiveness in order to win over global rivals, they had to cut labor costs as much as possible by outsourcing non-core operations.

Many labor-intense companies chose to move their plants to China or Vietnam for cheaper labor. A number of manufacturers moved even to the Gaeseong industrial park in North Korea despite high level of political risk, relying on the promise by the world's most unreliable regime for the sake of cost saving. It shows how desperate businesses' efforts to reduce costs are. The consequence is the number of irregular workers surged to 5.48 million in 2007 (equivalent to 36.6 percent of the entire workers) from 3.6 million in 2001.   

Two-year contract is rare worldwide

However, the labor law denied the changing economic conditions and took an easy way to give a uniform 2-year transition period for irregular workers. There are more simple and fundamental solution to resolve the irregular worker issues and furthermore, unemployment problems: the government hires all the irregular workers and jobless people as a full-timer. If jobs are not sufficient, they can have three people take turns for one-person work. 

Since they have to pay the wages out of taxpayers' money, they should distribute one-person's wage to the three workers. Then, they can achieve complete employment and equality. This is a communist society. In this type of society, jobs and wages are guaranteed by the states regardless of the performance. As a result, the productivity will decline to such an extent that the state cannot offer even the third of the job to the workers. That's what we witnessed at the end of the 20th century. With law alone, we cannot create any jobs. 

The 2-year grey period is rare in the world. Germany is one of the few with 2-year contract system but allows four-year term for start-ups. Belgium and the Netherlands grant 3 years, the U.K. and Ireland takes 4 years, and Hungary allows 5 years. Meanwhile, there is no limit on contract for irregular workers in the U.S., Australia, Canada, Switzerland, Czech, Denmark, Poland, Austria, etc. This shows a few socialist-oriented countries in Europe adopt the limited contract period while most market economy-oriented countries allow unlimited terms of contract. South Korea is a "front-runner" among global players in terms of contract period limit.  . 

The irregular workers' law causes unacceptable consequences of turning only marginal number of contractors into regular workers and forcing the majority out of jobs. This is not only detrimental to employers and fatal to the dismissed. That's why people say the labor law intended to protect irregular workers is rather choking them.   

The government and ruling party proposal of extending the gray period is nothing but a stopgap. Since the present labor law cannot resolve the problem of irregular workers, the law should be abolished, rather than patched up with an extension.

Extension is only a makeshift

We don't have to entirely deny the existence of irregular workers as it can be a natural type of employment at a time when technology and industrial structure change fast. Sometimes, temporary jobs can be good for not only employers but also workers themselves. More than half of regular workers have voluntarily signed for contracted jobs and their wage level has risen to 90 percent of that of regular workers. 

Workers can enjoy wider range of job choices when they are allowed irregular jobs. Therefore, our society needs to rationally utilize temporary jobs while erasing unreasonable regulations over them and unfair discrimination against them at the same time.   

Even so, illegal discrimination against irregular workers and a rise in the number of temporary jobs should not be tolerated. A policy to improve the job security for irregular workers, remove the discrimination and reduce the temporary jobs should be introduced. Forcing employers to offer full-time jobs to irregular workers within a specified time period cannot resolve the problem.

The solution is to help the irregular workers improve their job skills so that they can easily find full-time jobs. Contracted workers should individually work hard for higher competence. It's not desirable for the government to support them with taxpayers' money by providing subsidies for job trainings and those turning irregular workers into full-time employees. But if necessary, they would better assist their promotion by providing job training chances with subsidies. 

But such a policy support has limitation. Unless the number of full-time jobs increases, irregular workers would only fill in the vacancies and have little chance for promotion. More fundamental and effective solution is to encourage employers to hire more full-time workers by narrowing the working conditions between regular workers and contracted workers,

Since it's not desirable for employers to hire irregular workers with higher turnover ratio and lower productivity, they would have more incentives to hire regular workers if full-time jobs cost little different from temporary ones. It would be ideal to raise the working conditions for irregular workers but that would make it hard for employers to maintain their cost competitiveness. Therefore, it would better lower the level of wages and other benefits for full-time jobs. In this sense, the labor unions' outcry for protection of irregular workers is far from compelling as long as the union members, mostly regular workers at large business groups, remain reluctant to make concessions to temporary and contracted workers.

By Lee Jea-kyo  / Lawyer at law firm Chungjeong

 

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