Korean Companies Hire More Workers Abroad Than at Home

Unemployment is rising, especially among young Koreans, despite the gradual economic recovery in the world economy, and the main culprits seem to be red tape and the rigidity of the country's labor market.

According to OECD statistics announced Friday, youth unemployment in Korea rose from 8.1 percent in 2009 to a record 9.8 percent last year. Yet in the U.S. it fell from 17.6 percent to 10.4 percent over the period and in Japan from 9.2 percent to 5.2 percent, while in Germany and the U.K. it also dropped about four percentage points. Overall, youth unemployment in the OECD fell an average of three percentage points.

One former economics minister here said, "This is what happens when there's not enough effort to reform the labor market, nurture new industries and implement structural reforms."

Major conglomerates that can offer high-quality jobs are tired of red tape and rigid labor regulations at home and move their production abroad. The Federation of Korean Industries compared the employment situation in seven major conglomerates from 2010 to 2016 and found that while local hires grew 8.5 percent or around 20,000 jobs, overseas hires soared 70.5 percent or 150,000 jobs.

A report by the Korea Economic Research Institute last August year showed that 11,953 Korean businesses that set up operations overseas hired 2.96 million workers there but took only 50,000 Korean staff with them. The number of workers they hired overseas is 6.5 times larger than the number they hired here in Korea.

Of course Korean businesses are not the only ones heading overseas in search of cheaper labor in an age of globalization and free trade. The difference is how each country responds.

The U.S., Europe, Japan and most other advanced countries have been doing the same, but they have also sought to create optimum conditions for businesses by slashing corporate taxes and red tape. The Korean government, by contrast, has done practically nothing to prevent a brain drain. The Bank of Korea said "more practical support" is needed, and the labor market is as rigid as it has ever been or more so. The notoriously militant labor unions and other vested interests here are nipping any necessary labor market reforms in the bud.

Cho Joon-mo at Sungkyunkwan University said, "Corporate investment has been sluggish due to red tape, while an inflexible labor market has made it difficult for young workers to find jobs. Without structural changes, employment is unlikely to rise."