Academic journal article East Asian Economic Review

Different Types of Liberalization and Jobs in South Korean Firms*

Academic journal article East Asian Economic Review

Different Types of Liberalization and Jobs in South Korean Firms*

Article excerpt

(ProQuest: ... denotes formulae omitted.)


In an effort to overcome the Asian foreign exchange crisis that erupted at the end of 1997, South Korea undertook various reform measures: currency and fiscal austerity, the structural reform of financial institutions and corporations, trade and capital liberalization, and reforms in labor-management relations and the sovereign sectors. As the global trade landscape shifted toward regionalism through the expansion of Free Trade Agreements, South Korea also adopted FTA-friendly strategies in early 2000. Wanting to escape trade disadvantages as a non-signatory and to liberalize its market in order to become an advanced trading country, South Korea developed an FTA roadmap in 2003 to achieve simultaneous FTA ratifications with influential economic blocs.

Reflecting these goals, South Korea's trade volume consistently increased from $225.6 billion (exports $132.3 billion, imports $93.3 billion) to $1 trillion for the first time in 2011 (exports $555.2 billion, imports $524.4 billion) since the financial crisis in 1998. 1 In 2013, total trade stood at $1.08 trillion (exports $559.6 billion, imports $515.6 billion). 2 South Korea's IFDI (inward foreign direct investment), which was a little over $1 billion in the early 1990s, increased significantly to $14.5 billion by 2013.3

The Korean financial crisis brought massive changes to the South Korean labor market. Until the mid-1990s, full-time regular jobs were the universal norm in South Korea. This work arrangement, which was made possible by strong economic growth, kept the unemployment rate low and guaranteed lifetime employment. However, the financial crisis led to unavoidable corporate restructuring, which brought about huge, unprecedented changes in the labor market. New policies rendered the market more flexible to facilitate this restructuring process, and allowed many companies to order massive layoffs and hire temporary, irregular workers to cut costs. As a result, the number of wage earners dropped from 13.2 million in 1996 (regular 7.5 million, irregular 5.7 million) 4 to 12.3 million in 1998 (regular 6.5 million, irregular 5.8 million), a loss of nearly 0.9 million regular jobs. After overcoming the financial crisis, the number of wage earners, including the pre-crisis surge of irregular workers, increased until it reached pre-crisis levels of 13.4 million workers by 2000 (regular 6.4 million, irregular 7.0 million). From then, the number of wage earners grew to 18.2 million (regular 12.3 million, irregular 6.0 million) by August 2013, with a pronounced increase in regular workers. In contrast to such gain in job figures, however, the average incomes of irregular workers fell from 65.0% of that of regular workers in 2004 to 56.1% in 2013. Irregular workers also have the disadvantage of being much less protected by the social insurance umbrella. Such poor working conditions of irregular employees remain a severe problem in the South Korean labor market.

Studies focusing on the changes in South Korea's labor market after the sweeping changes of economic liberalization have been limited to examinations of the impacts on skilled and unskilled labor as a factor of production. Numerous domestic studies explored the effect that trade and investment liberalization have had on employment and wages, but these focused primarily on overall employment, overall income, or skilled and unskilled labor (Kim, Park and Lee, 2005; Ok, Jeong and Oh, 2007; Suh et al., 2008; Jeong and Kim, 2009; Chun, 2011). Two recent studies, Lee and Lee (2013) and Lee, Kim and Sim (2014) did classify labor into regular and irregular job-types but only analyzed the impacts on wages.

Therefore, this study classifies economy openness into imports of intermediate goods, total imports, IFDI, and foreign ownership that represent trade and investment liberalization and employee in the context of regular and irregular jobs. …

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