The old City Hall building in front of the new City Hall building in Seoul. The green field in the foreground is Seoul Plaza, a popular gathering spot and venue for numerous events and festivals. Photo: iStock

Last weekend when I walked past Seoul’s City Hall, my attention was drawn to a large banner that was hung between two telephone poles on a side street. The banner was a plea to Mayor Park Won-soon to convert the status of the city’s temporary workers, often translated into English as “irregular workers,” to permanent-employee status.

These workers are not alone. According to the latest data from Statistics Korea, there are nearly 5 million South Koreans, out of total workforce of just over 26.4 million, in this temporary-employment category. Most people in this category are competent and well motivated, but they labor alongside permanent staff who enjoy full employee-benefit packages.

“Korea will continue to struggle with the enduring problem of people who are employed under temporary contracts, or ‘irregular workers’ as the Korean term for these workers is usually translated,” said Tony Michell, chief executive of Korea Associates Business Consultancy in Seoul.

The problem is not incompetence, but the additional costs entailed if temporary contracts are converted to permanent jobs.

“Workers in this category are employed via temporary contracts that expire within a two-year period,” Michell said. “They receive fewer benefits than fellow workers who are employed on a permanent basis and are often not retained when the two-year term expires.”

This is generally not due to any fault of the employees themselves. Rather, as Michell points out, “This is because if they continue to be employed beyond the two-year point, then their employers must convert them to permanent-employee status, which then entitles them to full company employee benefits.”

That entails a far higher degree of wage-related expenses for the company or other entity that has hired the employee, so most prefer to not to offer contract employees permanent positions.

This is reflected in the breakdown of employment status in the country. According to Statistics Korea, of the slightly more than 26.4 million South Koreans who hold jobs, just 13.5 million are permanent workers.  Of the 4.9 million workers in the temporary category, there are those who are on full-time contracts for a two-year term, as well as those who are working part-time.

Additionally, about 1.5 million workers are employed on a daily basis, as either part-time workers in various fields or as construction site workers who are hired on an “as-and-when-needed” basis.

Ghettoized employees

“The labor law that provides for temporary workers to be given permanent jobs if they continue with the same employer for over two years was conceived with the best of intentions,” said Brendon Carr, a senior lawyer with employment specialty firm Hwang, Hong and Co.  “But it has resulted in ‘ghettoized employees,’ as in almost every case the company terminates the employee at the two-year point and then cannot rehire that person again. “

This means that many employees in a particular sector, finance for example, lack a career path. “They simply drift from company to company within the same sector on two-year stints with each company,” Carr said. This is certainly not what the framers of the labor law had in mind when they passed the legislation, he reckons.

There is a related problem, Carr noted. “Permanent employee” means exactly that: When companies are not able to dispense with an employee’s services except for extraordinary reasons such as teetering on the brink of bankruptcy, “There is no employer/employee flexibility, since companies tend to be extremely cautious about offering permanent employment contracts, and by the same token employees who are on permanent status are very reluctant to change employers unless they receive a permanent job offer from another company,” he said.

The result is that the labor market is now a twin-tier market with those in the permanent status enjoying, as Carr put it, “exceptionally privileged positions, since they essentially cannot be fired, and those in the unenviable position of having to work for a series of employers on temporary, two-year contracts.”

President Moon Jae-in has said he will provide permanent jobs to many employees of the South Korean government who now work on temporary contracts, but his ability to do so will depend on the willingness of the National Assembly to agree to the additional spending that such changes inevitably imply.

Unless further reforms can be agreed and passed into law, this highly polarized unfairness must eventually have political repercussions.

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Hank Morris has been an American expatriate in Korea for nearly 40 years. He first came to Korea in the 1970s with the US Peace Corps. Since the early 1980s his primary career has been in banking, securities and asset management. He also writes for financial publications and is a frequent commentator on the Korean economy and its securities markets.