News Analysis: S. Korea's labor reform feared to boost division among generations

South Korean President Park Geun-hye on Thursday expressed her strong will to reform the labor market in the second half to create jobs for youths, but the reform was feared to boost between-generation division as it called for the sacrifice of parents for children's getting a job.

"Without labor reform, youth unemployment cannot be resolved," Park told a nationally televised statement to the public to explain her scheme on the second-half state affairs management.

Jobless rate among South Korean youths exceeded 10 percent, and the number of those failing to find a job after college graduation surpassed 1 million. The rising unemployment drove those in their 20s and 30s to increasingly abandon wishes to date, get married and have babies, coining a new word of the "three-abandoning generation."

Park said that the labor reform would be focused on job creation among youths, which is a key to solving the low birth rate and a base to make the society healthier.

Everybody agreed to the need to create youth jobs, but the labor world disagreed on the way of labor reform as the parent generation would fall victim to the reform drive, which requires the sacrifice of parents for children.

The government plans to introduce a rule on general firing requirements for workers, under which workers can be fired at any time based on poor performance and lack of ability to perform tasks.

It also plans to force public companies and government ministries to adopt the "wage peak system" and expand it later to the private sector. The system requires workers to accept lower wages from an age of more than 55 or so to reduce corporate burden for labor costs. It would result in less severance pay, which is calculated based on wages in the last three years before retirement.

The country has pushed for those changes in the labor market as a legal retirement age of 60 comes into force in 2016. According to corporate customs, most workers tended to retire from office at the age of 55 in the past.

The retirement age was extended locally and legally bound for the first time, but it was still lower than advanced countries' retirement age of 65. South Korean companies have been less competitive, incapable of paying salaries for the elderly employees.

The easier sacking of and less pay for the elderly workers would likely drag down the already faltering economy further because the elderly are consumers with great potential amid the rapidly-aging population.

Park, who had taken office around two and a half years ago with the support of the older generation, was calling on the parent generation to "share pain and make concessions for our daughters and sons and our country's future."

However, a class with vested interest was not the older generation, a majority of whom are employees, but family members running the country's largest conglomerates who are employers and the richest.

It would be better for the government to introduce stronger welfare policies for the unemployed and the retired, who are potential consumers, by renovating the taxation system and the corporate governance only in favor of the richest and the employers.

Conglomerates may increase the hiring of youths in the short term by sacking the older generation and reducing labor costs, but over the long run they would not employ more to maintain the reduced costs as cash reserves in the book.

As of the end of March, cash hoardings by top 30 companies topped 700 trillion won (600 billion U.S. dollars) as companies refrained from employment and investment amid the economic slowdown. South Korea's GDP rose 0.3 percent in the second quarter from three months earlier.

Demand for sacrifice from the older generation may widen a gap with the younger generation. The ruling Saenuri Party, which has a low support base among youths compared with the opposition parties, positively responded to President Park's reform drive ahead of general elections scheduled for April next year.

Lobby groups representing the management welcomed the reform drive. The Korea Employers Federation said in a statement that it shared the view of President Park over the need for labor reform and would actively cooperate with the government.

The Federation of Korean Industries hailed Park's plan, saying that the labor reform should be pushed rapidly to create youth jobs by drawing concessions from the management, labor and the government. Endi