The importance of having an efficient labor market is growing because of recent trends such as globalization, the development of information-communication technology (ICT), and the increasing need for foreign direct investment and job creation. The innovations of ICT can produce higher economic growth with less labor. Under these economic circumstances, labor markets should respond quickly to rapidly changing product markets
All these trends emphasize the importance of retaining the flexibility of the labor market in a country’seconomy. What is flexibility in the labor market? Bernard Brunhes in 1989 identified five main elements oflabor market flexibility: external numerical flexibility, externalization, internal numerical flexibility, wage flexibility, and functional flexibility.
Generally speaking, though, it is obvious that firms and an economy need to increase their labor marketflexibility to compete in the current economic situation. An increase in labor market flexibility might implydecrease in job security in terms of the typical oncept of labor flexibility. If so, the next question would be how to amend laws and collective agreements to increase labor market flexibility without causing large-scale conflict between management and labor unions or workers.
The Korean labor market has been criticized for its lack of the elements of flexibility mentioned above. Some argue that labor market inflexibility is one of the major factors that is obstructing the steady growth of the Korean economy. However, the financial crisis in 1997 changed the structure of the Korean labor market dramatically. As a result, employment protection regulations were partially eased in 1998, and firms tried to resolve all excessive labor and facilities disputes in order to survive and successfully carry out the restructuring process.