Labor Hour Reductions

Another storm is coming to the business community, this time in the form of a weekly working hour reduction from 68 to 52. Along with the ordinary wage issue that heated up throughout last year, the matter is signaling a tectonic shift in the way of doing business down the road.

According to the current Labor Standards Act of Korea, the weekly working hours is 40, and up to 12 hours of overtime are allowed. The number increases to 68 per week when 16 hours of holiday time is added. The annual working hours of Korean workers, which have reached an average of 2,092, are the third-longest among OECD member countries. Nonetheless, Korea’s labor productivity per hour is limited to US$29.70, much less than the United States’ US$60.20 and the OECD average of US$44.60. The employees have made up for their wages by working more, and the employers have ordered them to work more instead of hiring more people. In the end, such long hours of work have broken the work-life balance in Korea, resulting in deteriorated living standards.

The participants of the Tripartite Subcommittee of the National Assembly have agreed to cut the weekly working hours from 68 to 52 during the course of their negotiations, but they have yet to address their different views on how to do so. Employers are insisting on a phased implementation of the law with a grace period, in order to place a lighter burden on their part. The labor community, meanwhile, is claiming that working hours must be reduced without any cut in wages.

Greater cost burdens due to reduced labor hours are becoming a reality on the part of the corporate sector. Employees are maintaining that the current wage level be retained by means of higher base salaries. There is no way to enhance productivity when the labor hours are shortened in such a rapid manner. Companies have to build more facilities or hire more workers, but this is a tall order for small and mid-size firms with little financial breathing room. This is just one of many more areas in which labor and management are having hard time addressing their differing views.

It is not desirable for law to come into play to handle the specific issues associated with working hours amid such a wide gap in opinions. What is necessary now is the minimization of regulations for the sake of a voluntary solution.

It cannot be denied that the working hours should be cut. However, when the law forces corporations to take on greater costs, jobs are sure to disappear along with investment in the long term. Then, employment increases, one of the goals of labor hour reductions, cannot be expected, and Korean companies’ competitiveness will plummet while foreign companies in Korea would not find the local economy attractive anymore. The most urgent matter is the improvement of productivity. Not only labor and management but the government and the political community will have to pool their wisdom on this subject with long-term views.

by Park Jung-hwan, Publisher & Editor-in-Chief