Seoul, Unions Agree to Ease Laws on Layoffs
South Korea and its militant labor unions today agreed to sweeping changes in labor laws that will make it easier for companies to fire workers as the country struggles with its worst economic crisis in decades.
The agreement, the first of its kind in Korea, challenges a notion dear to many people here: That a job, once taken, is theirs for life.
For unions, whose strikes often cripple entire industries for weeks at a time, it is an acknowledgment that Korea must make fundamental changes to shore up its economy. Next to those in Japan, Korean workers are the highest paid in Asia.
Stocks rallied for the first time in three days because the new laws may help companies cut costs. The benchmark Korean Composite Index rose 4% in early trading today.
“It’s excellent news,” said Hubert Neiss, the most senior official in Asia for the International Monetary Fund, which arranged a record $60-billion economic bailout for Korea in December.
Details of the agreement, the product of 20 days of bitter negotiations, weren’t disclosed. All parties involved--the government, companies and unions--said the new laws are designed to make Korea’s labor market more flexible in the face of the slowest economy in two decades.
As recently as Jan. 20, union negotiators said such an agreement might throw 1.5 million of Korea’s 45 million people out of work this year alone. Some 658,000 Koreans were unemployed in December, putting the country’s unemployment rate at 3.1%.
Even before the accord, some company executives and economists had predicted that unemployment would rise to at least 5% this year, a level not seen since 1986.
Reforming labor laws is key to rebuilding the economy, government and IMF officials said. Korea’s unions are known for staging long and, at times, violent strikes.
Korean companies have already started to pare staff. A record 15,000 companies went bankrupt last year.
Companies hailed the accord.
“We now have more initiative to cut out work force,” said Dong Nam Bank spokesman Ju Wo Hyun.
