Labor Market Dualism: We Must Not Miss the Golden Window for Reform

The dual structure of the labor market is one of the chronic challenges our society has failed to resolve for a long time. The gaps between regular and non-regular workers, large corporations and small and medium-sized enterprises, and high wages and low wages go beyond simple differences, leading to social imbalances and a severing of opportunity. Within this structure, young people experience inequality from their very first jobs, while SMEs suffer from chronic labor shortages.

Our society has long pursued a fair labor environment. However, “fairness” does not simply mean identical treatment. An environment in which people can compete without discrimination based on ability and performance, along with institutional flexibility that respects diverse forms of work, is also an important element of fairness. From this perspective, resolving the labor market’s dual structure is not merely a measure for vulnerable groups, but an essential condition for the vitality and sustainability of our entire economy.

Denmark’s “flexicurity” model offers a balanced approach. While dismissals are relatively easy, strong unemployment insurance and reemployment support are provided, allowing labor flexibility and employment security to be pursued at the same time. As a result, unemployment remains low and mobility within the labor market is active. Workers feel less anxiety about dismissal, and firms can manage their workforce more easily.

The U.S. case is also worth noting. Under the principle of “at-will employment,” companies in the United States can dismiss employees without special cause, while employees likewise have the freedom to leave their jobs at any time. At first glance, this may seem unfavorable to workers, but this employment flexibility has contributed to Silicon Valley’s emergence as a global hub of innovation. Major companies such as Apple, Google, and Meta regularly restructure to maintain competitiveness, while talented workers freely change jobs in search of better opportunities.

In particular, the United States has developed a culture in which frequent job changes are seen as an indicator of individual ability. “Job hopping,” in which workers actively move to new positions to build new skills and experiences, is often evaluated positively. This culture creates an environment in which workers do not fear dismissal. Even if they are laid off, they can generally find new employment relatively easily, and may even view it as an opportunity to secure a better job.

The government has maintained a worker-protection-centered policy stance, including expanding the conversion of public-sector positions into regular employment and raising the minimum wage. These efforts represent meaningful progress in protecting workers’ rights and interests, but from a longer-term perspective, broader reform of the overall labor market structure must proceed in parallel.

Measures such as rational improvements to regulations on dispatched and fixed-term workers, expansion of flexible work-hour systems, and wider adoption of job-based compensation systems could offer solutions that enhance both labor flexibility and business vitality. Excessive labor regulation undermines market autonomy and ultimately constrains job creation as well. Reform of the labor market structure should not lean solely toward either deregulation or stronger protection, but should instead seek a balance between flexibility and stability, fairness and competitiveness. A variety of approaches are needed, including support for young people and SMEs, active labor market policies, and broad social compromise.

The direction of labor policy should move toward a balance between “protection” and “flexibility.” To address structural problems that cannot be resolved simply by expanding regular employment, a more flexible way of thinking about work styles and forms of employment is required. This would provide a foundation for enhancing corporate competitiveness and offering diverse opportunities to the younger generation. For a fair labor market and sustainable jobs, this is a moment when broader, more reality-based policy discussion is urgently needed. One hopes the government can take that first step responsibly.

Hea-lim Park, Senior Research Fellow, Center for Free Enterprise (CFE)

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Original title: 노동시장 이중구조, 개혁의 골든타임 놓쳐선 안돼

Author: Hea-lim Park

Date: 2025-07-16

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=27904