Job security and flexibility in Korea

The paper reviews post-crisis changes in job security regulations, labor market flexibility and labor market policies in Korea. Specifically, it addresses three questions:

• How do job security regulations affect labor market flexibility?
• How strong are they in the Korean market?
• Is the continuation of active labor market policies required?

To evaluate the impact of labor market regulations on the labor market, an empirical analysis on the labor markets is conducted, along with comparisons with international studies.

The analysis suggests that:

• Average job tenure has increased and turnover rates have decreased in Korea among regular workers in establishments of ten or more employees.
• Korean labor market flexibility has not been much enhanced despite the post-crisis changes in labor market regulation at least among regular workers.
• Job security regulations do not affect the size of employment, but do hinder the economy wide job creation and reallocation of labor.
• Labor market program expenditure as a ratio of Gross Domestic Product (GDP) in Korea has reached levels similar to that of major European countries.
• Active labor market policies are found to be not very effective or efficient, mainly due to the conditions under which they were introduced in the labor market.

In order to create and sustain an efficient social policy framework in Korea the paper recommends the following:

• Continuous regrouping of unemployment programs.
• Functional or institutional integration of income support and unemployment program management