SEOUL: The South Korean government is pushing ahead with a 4.5-day workweek, a flagship campaign pledge of President Lee Jae-myung, drawing concerns from the business community, which warns that reduced hours could undermine productivity and drive up costs.
On the campaign trail, Lee proposed reducing the statutory workweek from 40 hours to 36 hours without a pay cut, with a goal of bringing Korea’s average annual working hours below the OECD average of 1,742 hours by 2030.
The average Korean worked 1,874 hours a year as of 2023. Lee is ultimately aiming for a four-day workweek, or 32 hours a week.
The Ministry of Government Legislation last week said it plans to submit a new bill on a work hour reduction to the National Assembly by the end of this year as part of 123 planned government legislative initiatives.
The new legislation, tentatively called the "Reduced Working Hours Support Act,” is expected to introduce subsidies and tax breaks for companies that adopt shorter hours.
Meanwhile, the Ministry of Employment and Labour on Wednesday launched a tripartite task force consisting of labor unions, business groups and government agencies to come up with a roadmap for cutting hours.
The push comes 14 years after the country’s five-day workweek was fully adopted in 2011, after a decade of phased implementation. Proponents say cutting work hours would improve work-life balance, prevent burnout and tackle Korea’s alarming birthrate decline.
“The 4.5-day workweek is not only the solution to overcoming the nation’s low growth and regional population decline, as recently pointed out by President Lee Jae Myung, but also the only key to resolving South Korea’s low birth rates and sluggish growth,” said Kim Hyung-sun, chief of the Korean Financial Industry Union, ahead of a strike demanding a 4.5-day workweek and higher wages.
The business community, however, raised the alarm that reducing working hours without boosting productivity could threaten companies already facing higher labor costs and economic uncertainty.
They say the proposed initiative is premature given that South Korea’s productivity lags well behind leading economies. OECD statistics reveal that in 2023, Korean workers generated $54.64 in GDP per hour, nearly half of the $97.05 produced by American workers and considerably less than Germany’s $93.72, France’s $87.30 and Spain’s $70.60.
“When Korea’s labor productivity is far below that of advanced economies, simply reducing statutory working hours will undermine corporate competitiveness,” the Korean Enterprises Federation said.
“Priority should instead be placed on introducing flexible work arrangements and improving the special overtime approval system so that labour and management can choose hours more flexibly.”
Small businesses warn they could be hit the hardest. “If the law expands to cover businesses with fewer than five employees, overtime pay will be applied starting Friday afternoons, when customers are at their peak,” said Song Chi-young, head of the Korea Federation of Micro Enterprises.
“The burden will then fall entirely on small business owners, which will be difficult for them.”
A recent study by the Sustainable Growth Initiative, a think tank under the Korea Chamber of Commerce and Industry, also cautioned that without productivity gains, a shorter workweek would widen the gap between wages and output, particularly for labor-intensive industries.
The SGI found that South Korea’s annual labour productivity per worker was at $65,000 in 2023, ranking 22nd among 36 OECD countries. That level is roughly half of Belgium's at $125,000 and Iceland's at $144,000, which have already introduced four-day workweeks, and well below France, Germany and the UK, which are running pilot programmes for shorter weeks.
It will be difficult for South Korea -- at roughly two-thirds the level of advanced economies now debating reduced workweeks -- to close its income gap with richer nations unless productivity improves, it added.
“Reduced working hours can boost job satisfaction and spur consumption due to increased leisure time,” the think tank said in a report.
“But without gains in hourly productivity, annual output will fall and labour costs will rise, increasing the burden on businesses.”
The study also found that wage growth has significantly outpaced productivity gains in recent years, causing the disparity to accelerate rapidly.
Wages and productivity grew in tandem from 2000 to 2017 at an average of around 3.2 per cent annually. But this trend changed from 2018 to 2023, when wages increased 4 per cent while productivity rose only 1.7 per cent. - The Korea Herald/ANN
