Improvement of Long Working Hours
Background
Recently, the Korean government has been concentrating its efforts on creating more jobs through shorter hours of work under the pretext of improvement of long-work practice.
In December 2010, the Ministry of Employment & Labor (MOEL) reported the ‘Comprehensive Measures for Shorter Working Hours’ to the President, saying that the MOEL will reduce the average annual working hours per employee from 2,111 hours in 2010 to 1,950 hours by the end of 2012.
Tthe MOEL conducted a ‘Survey on the Shift System in June 2011, releasing the results in September. The survey reveals that 43.7% of Korean automakers use a shift system, which is almost twice the average in the manufacturing industry (22.2%). The survey also revealed that the use of both day and night shifts is most common in the automobile industry (90.7%).
The MOEL then conducted a ‘Survey on Working Hours for Car Makers’ and requested car companies to submit plans to correct their breaches of the overtime limit, as well as plans to switch to a three-group, two-shift system. For the upcoming general elections, the Grand National Party is making ‘Shorter Working Hours,’ a campaign pledge, in line with the issues of job creation and welfare.
Prospects for 2012
Considering the MOEL’s policy direction and the political community’s campaign promises regarding job sharing through shorter working hours, the pressure on companies to change the current shift system is likely to grow.
The MOEL submitted a “Plan for Intensive Monitoring of Working Hours” to the President in 2012, expecting that if large companies are investigated first, improvement in this area will quickly extend to car-parts suppliers. The MOEL is intent on taking any steps necessary to see this improvement; including changing the current administrative interpretation that holiday work is not considered overtime work.
According to current 40-hour workweek regulations, workers cannot work more than 52 hours per week; however, work on paid holidays (ex. Saturday) is not counted within this 52-hour limit. Some lawmakers in the United Democratic Party have recently become strongly opposed to the idea of ‘holiday work’. The MOEL will likely agree with this and use it to reduce working hours.
Business Viewpoint
We need to recognize that working hour regulations have a negative impact on job creation when such regulations fail to consider the importance of concessions from both workers and management, the increasing associated labor costs, and labor market conditions.
The actual number of working hours in Korea is more than those in other countries. However, these are decreasing more rapidly than other advanced nations. Between 2000 and 2008, the average annual working hours of a Korean employee dropped 29.8 hours every year, while the OECD average decreased only 4.5 hours every year.
Also, as job creation is a complex issue related to many factors besides working hours, the effectiveness of fewer working hours is rather dubious. Although the labor community is demanding a working hour reduction without wage cuts or more intense workloads, such demands are realistically impossible and excessive.
There are some practical problems to consider, such as labor supply and demand and the fundamental characteristic of overtime work. Without taking these various factors into account, simultaneously attempting to create more jobs and increase regulation of working hours may have negative outcomes.
The number of working hours needs to be adjusted by companies at their own discretion, according to the type of work, based on higher productivity and a paradigm shift, rather than strengthening regulation.
Wage Adjustment Issues in 2012
Due to high inflation and a distracted social atmosphere by the general and presidential elections, trade unions are likely to demand excessive wage increases at the collective bargaining table. Considering the growing economic uncertainty and worsening business conditions, companies need to keep wages stable with a minimum increase.
Wage Adjustment Rate Recommended by the KEF
The KEF’s ‘Guidelines on Appropriate Wage Adjustment,’ released every February, has played an important role in wage adjustment suggestions for employers when they discuss wages in collective bargaining. This year again, the KEF plans to announce an appropriate wage adjustment rate for 2012, taking various factors into account:
(Factors keeping wages stable) The overall business environment is worsening due to slow economic recovery and the debt crisis in Europe. Raw material prices are being pushed upwards, and exchange rates fluctuate often.
(Factors increasing wages) Following 2011’s high inflation, prices are still showing a tendency to rise. Wages in the public sector are set to increase by 3.5%. Added to this is the likelihood that unions will use the distractions of the upcoming elections to push for impractical wage increases.
【 Figure 1 】 Factors to Consider in Wage Adjustment
