[Enemies of Reform⑨] "Flexible Working Hours Means 'Back to Overwork Society'? NO... Reform Possible Even Without KCTU"

"The wage gap between large corporations and small and medium-sized enterprises (SMEs) in our country is unprecedented internationally. We need to resolve the dual labor market structure through strengthening vocational training, reforming wage systems and working hours, and enhancing the competitiveness of SMEs."

Professor Jeong Seung-guk of the Department of Social Welfare at JoongAng Seungga University, who participated in the Presidential Transition Committee and contributed to outlining the new government's labor policy, said this in a recent interview with Asia Economy. He is regarded as an expert on domestic and international labor markets, having personally visited then-candidate President Yoon Seok-yeol to provide 'labor tutoring.'

Professor Jeong identified the deepening 'dual labor market structure' between large corporations and SMEs, and between regular and non-regular workers, as a priority issue for the new government to address. While wages in large corporations and among regular workers have significantly increased due to productivity growth, SMEs and non-regular workers have not experienced such growth, leading to increasing polarization that is eventually spreading as a social problem. 'Enemies of Reform'

He also predicted that although the Korean Confederation of Trade Unions (KCTU) pursues a hardline struggle, labor reform could achieve results under the new government. Professor Jeong said, “It seems unlikely that the KCTU will participate in social dialogue,” adding, “The government appears to believe it can achieve results through dialogue with the Federation of Korean Trade Unions (FKTU).”

Below is a Q&A with Professor Jeong.

- What is the cause of the worsening dual labor market structure domestically?

▲ First, the reason the dual structure between large corporations and SMEs has recently worsened is due to the widening productivity gap. Large corporations have global competitiveness and rapidly adopt artificial intelligence (AI) and automation, whereas SMEs do not. The IT industry is a representative example: developers working mainly in large corporations see their wages skyrocket, but SMEs cannot afford to hire such expensive developers.

In advanced countries, SMEs have generally formed as independent companies, but in our country, rapid industrialization led by conglomerates and large corporations has resulted in an unequal relationship that still persists. The wage gap between regular and non-regular workers is mainly due to institutional issues. The social security system was originally designed around regular workers and still maintains that structure. Particularly, in our country, regular workers receive much higher wages compared to non-regular workers, which is a unique characteristic compared to other countries.

- How should this be addressed?

▲ We need to expand the technological competitiveness of SMEs. Until the 1960s, Japan also had a severe dual structure, but from the 1970s to 1980s, the gap significantly narrowed, largely due to the expansion of technologically competitive SMEs.

It is also necessary to strengthen vocational training to help workers find better jobs. In the post-industrial economy, it is rare for workers to be fixed to a specific workplace. For example, a non-regular worker who moves to a better job through vocational training experiences a 'good transition.' Recently, there has been an IT boom, but workforce development has not kept pace. We need to supply the necessary workforce to the industry through vocational training and build infrastructure that provides workers with opportunities to move to better jobs.

- How can the seniority-based wage structure be reformed into a job- and performance-based system?

▲ Previous governments introduced job-based pay partially in public institutions, but often only superficially, such as setting very narrow wage gaps between job grades. The new government must not just imitate but properly reflect management evaluations and reform the wage system accordingly. However, it is difficult to mandate wage system changes in private companies overseen by the Ministry of Employment and Labor. The government should support infrastructure such as consulting, providing market wage information by job unit, distributing guidelines, and developing job evaluation methods.

- Labor unions oppose the introduction of job- and performance-based wage systems.

▲ Job-based pay is the only wage system that adheres to the principle of 'equal pay for equal work.' European unions build wage solidarity through job-based pay. Since labor unions recognize the principle of equal pay for equal work as a labor movement principle, it is not easy for them to oppose job-based pay outright.

- There are concerns in the labor sector that flexible working hours could lead to a society of overwork.

▲ There are diverse interests among worker groups regarding flexible working hours. Young people tend to prefer the current 52-hour workweek system, while many workers feel their wages have been reduced due to the 52-hour limit. Therefore, workers and employers should be allowed to autonomously choose working hours. Since the proposal is to flexibly adjust working hours within the 52-hour system while implementing health protection measures for workers, it will not regress into a society of overwork.

- Are wage structure and working hours flexibility measures to resolve the dual labor market structure?

▲ Yes. One important characteristic of our labor market is weak internal flexibility. If internal flexibility in working hours and wages is sufficiently guaranteed, there is no need to rely on external flexibility by employing non-regular workers. Thus, the rigid labor market in our country exacerbates the dual structure problem. Germany is a representative example: it has highly developed working hours flexibility and a job-based wage system, so there is no reason to employ non-regular workers.

- The KCTU has announced a series of strikes. Will labor reform be successfully implemented?

▲ The government's labor reform partner is the Federation of Korean Trade Unions (FKTU). The Cargo Solidarity and other unions that have announced strikes belong to the KCTU. Of course, labor reform discussions would proceed more smoothly if the KCTU participated in social dialogue, but currently, it is difficult to predict their participation. The government seems to believe it can achieve some labor reform results through dialogue with the FKTU.

- What is your view on criticism of militant 'aristocratic unions'?

▲ Generally, 'aristocratic unions' refer to unions with average annual salaries close to 100 million won, that engage in combative strikes during wage negotiations, and show little interest in wage solidarity. In our country, some workplaces under the KCTU Metal Workers' Union may fit this description. This is a very unique phenomenon in our country and lowers the overall status of labor unions. In France and Italy, wage equality is quite high, and even in Japan, the wage gap between large corporations and SMEs is small, so it is difficult to call their unions 'aristocratic.'