The competitiveness of South Korea's labor market moved down three notches in this year's national competitiveness report published by the World Economic Forum.
In particular, Korea's ranking in the employment and dismissal practices, which indicate the flexibility of the labor market, fell as much as 15 notches. It means that the rigid employment market is dragging South Korea’s national competitiveness down.
South Korea placed 51st in labor market competitiveness this year, down three notches from last year's 48th, according to the Global Competitiveness Report 2019 released by the WEF on Oct. 9. Its ranking dropped from 114th to 116th for layoff costs and from 87th to 102nd for employment and dismissal practices. It took 130th place for labor and management cooperation out of the 141 countries surveyed, moving down six notches from last year.
Some point out that the country’s worsening competitiveness in the labor market is due to the government’s pro-labor policy. The Moon Jae-in government abolished the former government’s guidelines on dismissal of underperformers and employment regulations as well as the performance-based annual salary systems for public institutions. These were introduced by the Park Geun-hye government to make the labor market more flexible. Instead, the incumbent government is pushing ahead with the revision of the Trade Union and Labor Relations Adjustment Act to ratify the International Labour Organization (ILO)’s convention that allows the unemployed and laid-off workers to become members. In general, experts regard the limitations on dismissals of underperformers as an important indicator of labor flexibility.
As the Moon Jae-in government focuses more on “income-driven growth” than “innovative growth,” the country also fell down from 22nd place to 25thplace in business dynamism. It also saw the drop in the rankings in startup costs, startup preparatory period, recovery rate of bankruptcy and legal systems of bankruptcy as well as business accepting creative ideas.
South Korea stood in13th among 141 countries surveyed in global competitiveness this year. The country's ranking rose by two notches from last year. It was the 10th highest ranking among36 OECD member states. The country showed the fifth highest ranking among 17 countries in East Asia and the Pacific area, following Singapore, Hong Kong, Japan and Taiwan.
South Korea topped the list in adoption of information and communications technology (ICT)and macroeconomic stability for two years in a row this year. It also stood at sixth and eighth in terms of infrastructure and health, with the rankings for financial system and institutions being 18th and 26th. The WEF said, “South Korea is a global leader that leads the ICT sector but it needs to raise its challenging entrepreneurial spirit, promote domestic competition and improve the double structure and rigidity of the labor market.”