Constraints on Large Firms’ Job Creation and Policy Remedies

Since the 1998 foreign exchange crisis, the capacity of large Korean corporations to create new jobs has steadily weakened, and primary labor market jobs have remained stagnant for an extended period amid structural changes such as automation and the relocation of production bases overseas. By contrast, employment has expanded mainly among SMEs and microenterprises, deepening the qualitative imbalance in the labor market. In particular, as the productivity and wage gap between large firms and SMEs has become entrenched, the transition to high value-added industries has been constrained, and the need for a policy response to the shortage of quality jobs, especially for young people, has come to the fore. To expand the share of employment in high-productivity sectors, institutional reform is needed in a direction that strengthens the growth foundation of large corporations and removes factors that distort resource allocation.

The current job structure of large corporations reveals structural problems in the following respects. First, there is the excessive market survival of marginal firms. Companies with poor financial structures over a prolonged period have been kept afloat through reliance on policy and financial support, undermining the efficiency of industry as a whole and reducing the employment and investment capacity of healthy firms.

Second, there is an imbalance in the industrial structure resulting from the growing share of SMEs. An employment structure in which SMEs account for more than 80% of employment constrains the realization of economies of scale and weakens the growth foundation of large corporations with technological innovation capabilities.

Third, the government’s SME support policies are causing delays in market exit. Various support programs, including policy loans, credit guarantees, and tax reductions and exemptions, are prolonging the market survival of financially weak firms and restricting the movement of resources toward firms with high growth potential.

Fourth, the growth foundation of innovative large corporations is weakening. As the share of resources occupied by distressed firms increases, large corporations face constraints in entering new businesses and making large-scale investments, weakening the overall momentum for innovation across domestic industry. In particular, a vicious cycle persists in which skilled labor and capital remain tied up in low-productivity sectors, limiting opportunities for large corporations to enter high value-added industries.

On this basis, this study presents the following policy directions for expanding jobs at large corporations: 1) introducing preemptive restructuring for marginal firms and establishing an early warning system; 2) gradually reforming the SME support system and introducing a selective support framework based on key performance indicators (KPIs); and 3) improving institutions to enhance labor flexibility and facilitate labor mobility.

I. Primary Labor Market Jobs That Are Not Expanding

II. Analysis of Labor Market Conditions by Firm Size

1. Scale of Job Supply by Large Corporations

2. Employment Stagnation at Large Corporations and Its Economic Effects

III. Analysis of the Structural Problems Behind Stagnant Jobs at Large Corporations

1. Excessive Market Survival of Marginal Firms

2. Industrial Structure Imbalance Resulting from the Growing Share of SMEs

3. Diagnosis of the Government’s Overlapping SME Support Policies: Causes of Delayed Exit of Marginal SMEs

4. Weakening of the Growth Foundation of Innovative Large Corporations

IV. Policy Recommendations for Expanding Jobs at Large Corporations

1. The Need for Swift Exit of Marginal Firms

2. Restructuring the Framework of SME Support Policies

3. Securing Labor Flexibility and Formulating Measures to Facilitate Talent Mobility

4. Directions for Institutional Improvement to Promote the Exit and Restructuring of Marginal Firms

References

Original title: 대기업 일자리 확대의 제약 요인과 정책적 개선방안

Author: Gyu-min Han

Date: 2025-08-26

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=report&pn=1&idx=28006