The South Korean government is accelerating the introduction of a "fair allowance" scheme that would provide additional compensation to short-term and non-regular workers. Labor Minister Kim Young-hoon said on KBS on Wednesday that "we are discussing with related ministries a fair allowance that pays a little more the shorter the employment period, and we will announce specific measures soon." The move follows President Lee Jae-myung's remark at the National Economic Advisory Council on the 9th of this month that "more unstable labor should receive greater compensation." The government is reportedly considering a plan to pay an additional 5 to 10 percent of basic wages, proportional to the employment period, to fixed-term workers employed for less than one year who are not eligible for mandatory severance pay. The scheme is largely an expanded version of a policy President Lee introduced for public-sector fixed-term workers during his tenure as Gyeonggi Province governor.
If there is a way to improve the treatment of short-term workers facing employment insecurity, there is no reason to reject it. However, policy does not run on good intentions alone. The moment the government mandates additional costs in the name of fairness, employers could have greater incentive to hire fewer people or shift toward automation and outsourcing. The experience under the Moon Jae-in administration, when convenience stores, restaurants and small manufacturers cut working hours and laid off part-time workers following sharp minimum wage hikes, illustrates this clearly.
Above all, it must not be overlooked that small and medium-sized enterprises, small business owners and small service providers are the ones who employ most short-term workers. They are already struggling under the multiple pressures of rising minimum wages, higher raw material costs and an economic downturn. The way the policy is being pushed forward is also problematic. Despite being a measure that could significantly impact the overall labor market, no meaningful public hearings have been held, nor have cost estimates been disclosed. The government's rush to draft a framework and announce it shortly after the president's remarks risks being viewed as a hasty, populist labor policy.
The mass production of short-term workers is undoubtedly a painful issue in Korea's labor market. All the more reason why the solution should focus on comprehensive regulatory reform and expanded employment flexibility that encourages the transition to permanent employment, rather than unilaterally ordering companies to pay additional allowances. Policymakers need to reflect on the "paradox of well-intentioned policy," in which measures driven by good intentions end up breaking the weakest link first.
