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Active Labor Market Policies in China and the Republic of Korea
Active Labor Market Policies in China and the Republic of Korea
  • SUMMARY
    Active labor market policies (ALMPs) are vital to employment promotion, productivity enhancement and people’s welfare. According to the ILO , active labor market policies (ALMPs) are those policies from the toolkits of policy makers that combine transfer payments with either work or training activities. They comprise an array of measures from job search assistance, training and education for the unemployed to subsidies for taking up jobs and job-creation activities. ALMPs are closely interrelated with “passive” labor market policies, as there is today an effort to “activate” the latter in order to enhance the integration of the unemployed and underemployed the labor market. Active policies are found in almost all countries of the world but differ in amplitude, design, and implementation. ALMPs can affect labor demand, labor supply, and the functioning of the labor market in matching the two. However, their effectiveness for affecting supply and demand of labor and integrating people in the labor market varies considerably across countries of measures. It is valuable to compare ALMPs in different countries in order to find the effective policies.
    In this world of globalization, learning from each other is more important than ever before. In the history of about 3000 years, China and Korea have the tradition of friendship and exchange. There are many reasons for me to choose this subject: First, China and the Republic of Korea have similar culture backgrounds, Since Korea is nearby to China, the development of Korea’s language, character, morality and structure are similar to China’s. That is the reason Korean and Chinese cultures are mutually acceptable and attractive, which are dominated by Confucian ideas. Since culture is influencing the ideas of every person, it has profound impact on employment and labor market decisions. Second, the historical backgrounds of development are similar. Both China and Korea have encountered invasions from imperialist countries. At certain period of history, both had been colonized or semi-colonized, and won national independence at the same year. Besides, China and Korea rose economically from very poor rural economies. In both countries’ development process, industrialization coincided with huge labor migration from rural to urban areas. Third, both have experienced high economic growth in the last 30 years. Since 1978, China has witnessed an average annual growth rate of 9.67%, while Korea had a handsome 8.5% from 1963 to 1996. Although during the last 10 years, Korea’ s annual average growth rate is not as high as that in the previous decades, it is still well above the world average. Forth, both Korea and China have been experiencing government intervention of economic lives, although both are market-oriented economies, the economic models in Korea and China are well controlled by the governments, and both have certain degree of characteristics of public economy and development planning. Fifth, in terms of corporate governance, both Korean firms and Chinese firms have strong internal labor markets, and employees are loyal to employers. Redundancy reduction in enterprises is rare and employment is quite stable unless the economic situation is very serious. Korea and China have developed similar institutions in the labor market. A dismissal without a just cause is strictly banned by the provisions and rules of EPL (Employment Protection Legislation). The HRM practices such as worker-based (not job-based) management system and seniority-based wages look similar in appearance between Korean firms and Chinese firms. Seventh, bipolarization in the labor market is currently the one of the distinctive issues in both China and Korea, although evidences of polarization in the Chinese and Korean labor markets are different. For example, the bipolarization in Korea is observed in the various dimensions such as large and small company, regular and non-regular work, union and nonunion sectors. The Chinese bipolarization is seen in the aspects such as rural and urban areas, migrant workers and local workers, standard and non-standard employees.
    Maybe these similarities could make the comparison between their ALMPs more worthwhile since Korea’s experiences can be a mirror to China’s future policies.
    This report is divided into three parts. First part is the discussion of the labor market contexts in China and Korea, the second part is a comparison between the ALMPs of Korea and China, and the third is the suggestions for China’s ALMPs in the future.