Labor Reforms Needed to Make Korea More Attractive to Foreign Investors
Key Highlights :
The Korea Chamber of Commerce & Industry's (KCCI) survey of 202 members of foreign chambers in Korea revealed that soaring wages are cited as the most pressing labor issue weighing on foreign firms operating in the country. This is followed by the country's rigid workhour system, confrontational labor-management relations, strict guidelines designed to prevent layoffs, and excessively harsh punishments for violations of labor laws. The survey also revealed that nearly half of the respondents believe that an advanced labor-management relations law is necessary to create less confrontational relationships between employees and employers.
Foreign-invested companies also want the cap on the weekly number of workhours to be eased, as well as favoring the introduction of a performance-based wage system and more freedom to lay off workers. The survey showed that 37.7 percent of the respondents said that the Korean labor market is less competitive than the labor markets of the countries where their headquarters are located.
The respondents expressed optimism about the Yoon Suk Yeol administration's labor policy reforms and how it has dealt with illegal strikes. Among the respondents, 50.5 percent said the labor policy reforms will make Korea more attractive to global investors, and 55 percent answered that Korea will draw more investments if the country roots out illegal strikes.
Mentioning Korea's proximity to large markets and its logistics environment as the most important reasons for their investments here, 95 percent of the respondents said they are satisfied with the outcome of their decision to invest in this country. In addition, 97 percent answered that they plan to maintain their investments in Korea at the current level or increase them.
The KCCI's head of the employment and labor policy team, Yoo Il-ho, stated that “Amid the supply chain restructuring in the aftermath of U.S.-China tensions, foreigners have increased their direct investments in Korea as an alternative to China. Along with deregulations and support measures to solidify Korea's status as an alternative investment destination, labor policy reforms are needed to bolster the competitiveness of the nation's labor market.”
It is clear that labor reforms are necessary for Korea to make it a more attractive investment destination for foreign investors. These reforms should include advanced labor-management relations laws, the easing of the cap on the weekly number of workhours, the introduction of a performance-based wage system, more freedom to lay off workers, and the rooting out of illegal strikes. With these reforms in place, Korea can become a more attractive investment destination for foreign investors, which will bring more investments and economic growth to the country.
