[Editorial] Job Sharing via Cutting Starting Pay

Companies, especially those in the public sector, will join a job sharing campaign involving pay cuts to hire more staff. The Korea Electric Power Corp., its subsidiary Korea Hydro Nuclear Power and state-run financial institutions have announced reductions in starting pay for college graduates, while increasing the number of new hires. Few state-run companies say they will join this program, but if they and private enterprises decide to actively participate in the campaign, the impact will be significant.

Korea desperately needs to create even a single job. Exports have plunged 29 percent this month, while the Korea Development Institute lowered its economic growth forecast to 0.7 percent for this year. The domestic situation is the worst since the financial crisis in 1998, and the number of jobs will decline instead of jobs being created. If jobs are to be created, annual growth of at least two percent is needed. Next month is February, the graduation season for colleges, but the worst job prospects in history are predicted. The government, companies and unions must join forces to push for the job sharing campaign to share the pain from a shrinking job market. The government is preparing incentives to encourage companies, including interest rate cuts for loans and delays in tax payments, but must speed up their introduction.

For the job sharing campaign to succeed, pay levels should be lowered. If labor costs do not decline even if a company changes its work schedule into an eight-hour, three-shift program, the job sharing program will become useless. Ireland and the Netherlands are considered success stories in job sharing, as labor, management and government all agreed on pay cuts to expand employment. Excessive labor regulations should also be eased. Unless rules on hiring, firing and employment conditions grow more flexible, even companies that have the capacity to hire more will become reluctant to do so. France tried a job sharing campaign by reducing the number of legal work hours but failed because the project did not create jobs.

Regardless of paying college graduates or existing employees, companies can employ additional staff only when pay levels are lowered. The starting pay for a college graduate in Korea is much higher than those in advanced economies. According to a survey by a business organization, a college graduate in Korea earns more than in Japan and double that of a college graduate in Taiwan, one of Korea’s economic rivals. If the gap is that large, cutting the starting pay for college graduates is inevitable just to ensure that Korea maintains its competitiveness.

Generous pay for college graduates at major conglomerates and state-run companies is negatively affecting the economy. As college graduates insist on landing jobs at large employers, small and medium-size enterprises are having trouble recruiting staff, even though the number of college graduates who continue looking for jobs for a second year after graduation has increased. This is waste of human resources that have been cultivated by heavy spending on education. Unless such an employment structure is changed, it will be impossible for a worker to succeed at a smaller company for his or her career and earn respect from society.

The starting pay of Korean college graduates constitutes the barometer for the comparison of pay levels between people according to education and workers in different industrial sectors. If the pay of college graduates increases, that of high school graduates will do so in tandem, which in turn affects the pay of day laborers. As such, Korea cannot maintain its industrial competitiveness if college graduates here earn 20 percent more than those in Japan. Koreans travel overseas to play golf and foreign tourists do not visit Korea because things are so expensive in the country. This is because of Korea’s high labor cost structure. Under this circumstance, one can hardly expect the expansion of exports and improvement of the current account balance. Paradoxically, now is a great opportunity for Korea to treat the “chronic disease” of the high cost structure given the major crisis in the job market.