Labor Market Reform
The government will cut down on the privileges of permanent employees at larger corporations and public enterprises for labor market restructuring based on its judgment that excessive protection for them has hindered labor market flexibility. Its plan is to reduce their wages and working hours, rather than laying them off, to encourage the companies to provide longer contracts and wider social insurance for temps.
The specific measures will be released before the end of this year, along with long-term restructuring plans covering the labor, financial, education and housing markets.
“Existing seniority-based wage systems cannot be swallowed any more by corporations, and the systems have to focus on individual employees’ jobs and performances for the extension of the retirement age to 60, which is scheduled to be in effect from 2016, to be successful,” a government official explained, adding, “At present, a small number of regular workers cause most of the labor market rigidity, and we can take care of non-regular workers and subcontractor employees only when those at big businesses and state-run enterprises make concessions.”
The government’s measures to this end are expected to include the expansion of performance-based pay, wage peaks, and flexible working hours. At the same time, it is considering lengthening temp contract periods from two years to three while, providing social insurance benefits for them.