POLICIES TO TACKLE LABOUR MARKET

DUALITY IN KOREA:

HOW DO YOUTH START-UPS FIT INTO THE BIG

PICTURE?

Global HR Forum 2014: Session

PL-3 Youth Start-ups & Job Policies

Seoul, 5 November 2014

Paul Swaim

Directorate for Employment, Labour and Social Affairs,

OECD

2

Outline of this presentation

Korean labour market dualism in international comparison: the diagnosis

Breaking down entrenched labour market dualism in Korea: the cure

Polices to reduce overall dualism

Policies to promote more and higher quality employment for women, older workers and youth

The importance of a coherent national skills strategy

Policies to promote youth start-ups

Temporary employment accounts for nearly one job in four in Korea, one of the highest shares in the OECD area

Percentage of dependent employment in 2011

4.2

12.0

13.7

23.8

30.3

0

4

8

12

16

20

24

28

32

0

4

8

12

16

20

24

28

32%%

3

Source: OECD Online Employment Database available at www.oecd.org/employment/database for temporary employment, and OECD calculations using the OECD Job Tenure Database for worker turnover.

Worker turnover in Korea is the highest observed in the OECD area

Sum of gross hirings and separations as a percentage of employment in 2010

20.6

37.1

72.3

0

10

20

30

40

50

60

70

80

0

10

20

30

40

50

60

70

80%%

4

Source: OECD Online Employment Database available at www.oecd.org/employment/database for temporary employment, and OECD calculations using the OECD Job Tenure Database for worker turnover.

Earning dispersion and the incidence of low-paid work in Korea are among the highest observed in the OECD area

In 2011 or latest available year

0

1

2

3

4

5

6

0

5

10

15

20

25

30

Ratio%

Low-pay incidence (left-hand scale) D9/D1 ratio (right-hand scale)

5

Source: OECD Earnings Distribution Database.

Temporary jobs are less often stepping stones to permanent jobs in Korea than in Japan and Europe

1-year transition probabilities from temporary to permanent employment

6

0

10

20

30

40

50

60

70

0

10

20

30

40

50

60

70%%

Source: OECD calculations using the Korea Labor and Income Panel Study for Korea

(waves 5-12) and the European Community Household Survey for European countries

(waves 5-8). Japanese estimate from Shikata (2012).

7

Summing up: the diagnosis

Labour market dualism is particularly strong in Korea

One-third of labour force is in non-regular employment and their pay, job security and career development opportunities are inferior to those of regular workers

Low productivity and poor employment conditions in the services sector and SMEs is also an important source of dualism

Labour market dualism reflects employer’s needs for flexibility and cost competitiveness, but these functional needs can be met in ways that create less inequality and insecurity

Labour market dualism particularly affects women, older workers and youth

Lower employment rates

Lower job quality when working

Policies to tackle labour market dualism:

Pillar 1

Reduce overall dualism in the labour market

Reduce the share of non-regular workers

Relax EPL for regular workers

Increase SI coverage of non-regular workers

Promote take-up of the corporate pension scheme by ending tax preferences for retirement allowances

Improve welfare and opportunities of non-regular workers

Harmonise EPL for different types of non-regular employment

Improve access to ALMPs

Introduce a sub-minimum wage tied to training for low-skilled youth

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Policies to tackle labour market dualism:

Pillar 2

Enhance employment opportunities for groups most affected by dualism

Women

Working time flexibility

Quality child care

Older workers

Restrict early retirement

Mute seniority wages

Youth

Reduce skill mismatch by further strengthening vocational education and career guidance

9

A high share of Korean youth with a tertiary education are not employed, probably due to skills mismatch

NEET rates of tertiary graduates ages 15-29 in 2010 (percentages)

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

20.0

22.5

25.0

27.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

20.0

22.5

25.0

27.5

Tur

key

Gre

ece

Italy

Spa

in

Japa

n

Isra

el

Mex

ico

Hun

gary

Est

onia

Irel

and

Slo

vak

Rep

ublic

New

Zea

land

Pol

and

Slo

veni

a

Por

tuga

l

Uni

ted

Sta

tes

Fra

nce

Fin

land

Den

mar

k

Cze

ch R

epub

lic

Can

ada

Bel

gium

Uni

ted

Kin

gdom

Sw

itzer

land

Aus

tral

ia

Ger

man

y

Aus

tria

Sw

eden

Net

herla

nds

Icel

and

Luxe

mbo

urg

%%

OECDb

Ko

rea

10

Source: OECD (2012), Education at a Glance 2012: OECD Indicators, OECD Publishing, http://dx.doi.org/10.1787/eag-2012-en; and Statistics Korea, Economically Active Population Survey.

Policies to tackle labour market dualism:

Pillar 3

Adapting the national skills system to better meet labour market needs involves:

Developing the right skills

Activating the supply of skills

Using skills effectively

Addressing the specific problems confronted by women, older workers and youth

11

240 245 250 255 260 265 270 275 280 285 290 295 300Score

Literacy skills in younger and older generations Korean has achieved a dramatic increase in the academic skills of younger cohorts

Av

erage 1

6-2

4 y

ear-old

s

KOREA

Germany

Norway

Av

erage 5

5-6

5 y

ear-old

s

Spain

Finland

France

US

UK

Source: OECD Survey of Adult Skills (PIAAC) (2012). 12

0

20

40

60

Norw

ay

Denm

ark

Sw

eden

Fin

land

United S

tate

s

Neth

erlands

Engla

nd/N

I (U

K)

Canada

Avera

ge

Irela

nd

Fla

nders

(Belg

ium

)

Austr

alia

Esto

nia

Czech R

epublic

Austr

ia

Japan

Germ

any

Spain

Italy

Kore

a

Pola

nd

Slo

vak R

epublic

Below level 1 Level 1 Level 2

%

Job-related adult education and training

Source: OECD Skills Outlook 2013: First Results from the Survey of Adult Skills

Those who need job-related adult education and training most get the least of it

13

Correlation between gender gap in wages and the use of problem-solving skills at work:

Many Korean women do not make full use of their skills at work

14 Source: OECD Survey of Adults Skills (PIAAC) (2012), Table A4.7.

Australia

Austria

Canada

Czech Republic

Denmark

Estonia

Finland Germany

Ireland

Italy

Japan

Korea

Netherlands

Norway

Poland

Slovak Republic

Spain Sweden

United States

Flanders (Belgium)

England/N. Ireland (UK) Cyprus¹ ²

0%

5%

10%

15%

20%

25%

30%

35%

40%

-5% 0% 5% 10% 15% 20%

Ge

nd

er

wa

ge

ga

p (

me

n m

inu

s w

om

en

)

% difference in the use of problem-solving skills at work (men minus women)

Policies to tackle labour market dualism:

Pillar 4

Policies to promote youth start-ups:

A solution for skills mismatch in the youth labour market?

Youth start-ups have the potential to reduce under-employment of university educated youth, while…

… also contributing to the emergence of the creative economy

However, a new model of entrepreneurialism is needed that mobilises cutting edge ideas and skills

Most start-ups in Korea takes the form of low-tech and low-productivity firms that stay small

The need in Korea is to mobilise university educated youth to play a leading role in the emerging creative economy

Lessons from other OECD countries

15

Very few entrepreneurs in Korea are trying to seize

a new opportunity Reasons for starting a business, 2012 (percentages)

16 Source: Entrepreneurship at a Glance 2014, OECD (2014).

0

10

20

30

40

50

60

70

80

90

100

opportunity family business necessity don't know

17

Policies to promote youth start-ups 3 lessons from other OECD countries and a Korea-specific challenge

It is important to be selective

Focus on the youth who are most likely to succeed

E.g. DEFi jeunes in France provides micro-finance, training and business counselling to applicants selected through a business competition by regional juries.

Favour more intense support per entrepreneur

Avoid temptation to spread support thinly

E.g. the Prince’s Trust Youth Business Scotland model offers intensive support for start-ups with the most growth potential, including Innovation Fund loans of up to GBP 30 000, along with intensive coaching

Provide an integrated package of support

E.g. .garage Hamburg provides up to EUR 3 000 of start-up capital, professional coaching and business advisory services.

Korea also needs to adapt these models to mobilise the high skill base of its youth

Many EU programmes focus on helping low-skilled youth, whereas the focus in Korea is to help high-skilled youth to contribute to the emerging creative economy

Striking the right balance between in-university and post-graduation programmes

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Summing up: the cure to high duality

Breaking down overall labour market dualism requires a comprehensive approach involving

Measures to reduce the share of non-regular workers in the labour force

Measures to improve the welfare and opportunities of non-regular workers

Targeted policies to expand the access of women, older workers and youth to highly productive employment are also needed…

…as is a better matching of the skill development system to the needs of employers and workers involving

Measures to reduce overemphasis on academic skills

Measures to improve the life-long learning system

There is also a role for promoting youth start-ups, but success will require developing new models of entrepreneurship

Thank you

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