SEOUL (Reuters) - Increasing labor productivity and reforming labor practices are among the top challenges facing South Korea as it grapples with a rapidly aging population and high youth unemployment, the head of the OECD said on Thursday.
South Korea ranks near the bottom in labor productivity within the Organisation for Economic Co-operation and Development (OECD) as South Koreans work long hours even while creating little value added, OECD data shows.
“You need more investment in skills, more flexibility in the labor market, more flexibility in the products market,” OECD Secretary-General Angel Gurria told Reuters in an interview, adding South Korea’s labor productivity is about 50 percent of that for the best members within the OECD.
South Korea’s gross domestic product value per hour worked stood at $31 in 2015, 48 percent of the United States and the fifth-lowest among the OECD members.
Liberal President Moon Jae-in has promised to create more jobs while at the same time cancelling his predecessor’s labor reform measures. Moon took office in May in an election held ahead of the schedule after his predecessor’s impeachment.
Moon has also promised to put a policy priority on narrowing the widening income inequality. A panel already raised next year’s minimum wage by 16 percent and the government plans to sharply increase spending on hiring public workers.
In response to criticism that Moon was leaning too much toward labor unions and income redistribution, Gurria said it was important for the government to take a balanced approach in policy between income inequality and economic growth.
“If you are trying to favor the unions by having more rigid labor market and keeping wages very high, you could be blocking people from getting new jobs,” he said, adding the young people are more likely to suffer.
“The young (suffer more) because the older people already have jobs, they belong to the unions and they are better protected,” he said.
Reporting by Choonsik Yoo; Editing by Kim Coghill