Text fwd: Increase in irregular works presents barrier to economic growth, research shows

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"Irregular workers fired from the Korea Veterans Welfare & Healthcare Corp and members of the Korea Health and Medical Workers’ Union hold a demonstration urging that fired irregular workers be reinstated."

Increase in irregular works presents barrier to economic growth, research shows
Korea needs to reorganize its export-reliant economic structure to strengthen internal demand, rather than increase labor flexibility, researcher says

There are many research findings that show, to the contrary of the government and business push for labor market flexibility in the name of rescuing the economy, that labor market flexibility -- including an increase in the number of irregular workers -- would be a barrier to economic growth.

Hwang Seon-ung, a postgraduate researcher at the Korean Contingent Workers Center, investigated the effect an increase in the employment of irregular workers would have on economic growth, using factors like recent labor income distribution, export and import functions and investment. Hwang said if 10 percent of today’s irregular workers were to become regular workers, it would boost Korea’s real GDP by 1.56 percent to 2.79 percent. This means that labor market flexibility could become a poison rather than medicine for economic growth.

In fact, there are many experts who are raising doubts from a social and economic perspective about the benefits labor market flexibility would bring. Song Tae-jeong, a researcher with the Woori Financial Group, said that even if seen from the long-term perspective, the most urgent thing to do to break through the current crisis was to expand purchasing power, but increasing labor flexibility was going in the diametrically opposite direction. He said the losses in corporate showings could be larger than the immediate drop in corporate costs.

There are also voices that say if seen from a wider perspective, employment flexibility is a “frog in the well”-style stop-gap.

Even if it does boost short-term growth potential, labor market flexibility could produce ill side-effects, too. A researcher at one national economic research center said today’s economic structure has moved to where things are determined by improving the quality of human capital rather than quantitative use of labor power. He said if the number of irregular workers increases, it would weaken Korea’s economic growth potential by dropping opportunities for education and lessening skills.


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Posted on : Jul.4, 2009 12:26 KST Modified on : Jul.4,2009 12:28 KST
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