[Op-Ed] Easing Big Business Regulations to Create Quality Jobs

Large companies account for 0.09% of all businesses in South Korea, ranking 33rd out of 34 OECD countries

Because of the tax burden, small and medium-sized enterprises and medium-sized firms do not want to become large companies

Of 300 regulations on large companies, 100 are outdated regulations enacted more than 20 years ago

As of August 2024, the number of young people who were “just resting” was tallied at 460,000. Following 440,000 in July, this was the highest figure ever recorded. In fact, according to data released by Statistics Korea, the youth employment rate stood at 46.3% as of September 2024, the highest level on record.

However, behind the youth employment rate lies a “decline in job quality” marked by an increase in the economically inactive population and a rise in non-regular workers. The unemployment rate and employment rate are calculated based on the economically active population. Therefore, an increase in the economically inactive population means that some people who were part of the economically active population have stopped participating in economic activity. One should not judge the economic situation solely by the unemployment rate and employment rate without considering what lies behind the statistics.

Among “resting youth” who say they are willing to work but have not engaged in job-search activities, 42.9% answered that the reason was “because there are no jobs that match the desired wage level or working conditions.” In other words, the biggest reason young people give up job hunting is the lack of quality jobs.

This dual structure of differences in wages and benefits between SMEs and large companies is leading to lower motivation to seek work and an increase in resting youth. As a result, the number of resting youth has recently reached an all-time high. This suggests that creating quality jobs is more urgent than ever. However, large companies currently account for only 0.09% of all businesses in South Korea. This places the country 33rd, near the bottom, among 34 OECD countries. It is only about one-ninth of Switzerland, which ranked first at 0.83%.

To create quality jobs, a foundation must be laid for domestic large companies to grow. To this end, their growth must not be obstructed. In reality, however, a “Peter Pan syndrome” has emerged in which medium-sized firms are reluctant to move up to large-company status because of the various regulations imposed on large companies.

As of the first half of 2023, the number of regulations targeting large companies was found to reach as many as 342. A perception has even spread among SMEs and medium-sized firms that “it is more advantageous to keep asset size below a certain level and avoid becoming a large company.”

According to a 2023 survey by the Korea Chamber of Commerce and Industry (KCCI) of 300 companies that moved up from small businesses to medium-sized firms over the past 10 years, 77% responded that they felt changes in support and regulation after the change in status. Of these, 30.7% said they had considered returning to small-business status.

In addition, when asked about the advantages and disadvantages of being upgraded to medium-sized firm status, the largest share, 48.7%, responded that “there is no difference from before.” This was followed by 38.7% who said that “the disadvantages are greater.” When asked, “What is the most burdensome policy change?” 51.5% answered that it was the increase in the tax burden.

These responses reflect the fact that, because of tax law provisions that differentiate by company size, the tax burden rises sharply as firms become larger. Of the roughly 300 regulations on large companies, about 100 are “outdated” regulations enacted more than 20 years ago. There are also many regulations that do not take inflation into account.

If Korean companies are to grow into global firms and create quality jobs, the top priority must be to ease the regulations that constrain large companies. Under regulatory reform, our companies will be able to grow further through free competition and the movement of capital.

Jungyoon Choi, Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [칼럼] 대기업 규제 완화로 양질의 일자리 창출해야

Author: Jeong-yun Choi

Date: 2025-02-11

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&idx=27313