This book shows that government labour and social policies, together with improved basic workers’ rights, helped minimise the costs of Korea's economic and financial crisis while also contributing to overcome it.

Comprises 17 papers which explore labour market reforms following the 1997 financial crisis. Covers income support programmes, labour law and labour market regulations, active labour market programmes and comparisons of the Korean experience with other countries.

Labor market duality is a complex and critical issue for many countries that can lower productivity, contribute to inequality and result in negative externalities. In this paper, I study duality in the Korean labor market and analyze its sources and potential policy options. I find that employment protection legislations and large productivity differentials are the key drivers of Korea’s duality. In addition, applying a general equilibrium search-and-matching model and calibrating it to the Korean economy, I show that well-calibrated flexicurity policies can significantly reduce duality and inequality and raise welfare and productivity. Notably, the introduction of all three pillars—flexiblity, a strong safety net and active labor market policies—is critical for its success. If only one pillar is introduced it can result in negative side-effects and might not reduce duality.

This paper examines structural challenges facing the Korean labor market and analyzes the macroeconomic effects of potential labor market reforms. Our cross-country empirical analysis finds that easing of employment protection legislation tends to have positive macroeconmic effects during periods of strong growth but could turn contractionary in periods of slack. By contrast, increased spending on active labor market policies and reductions to the labor tax wedge tend to be more effective in periods of slack. Our analysis thus highlights the importance of considering economic and policy conditions when designing labor market reforms. Under the current disinflationary policy stance, the government’s focus on the working hour reform seems appriorate. With growth recovering, deregulation to reduce employment protection for regular workers can also be considered, combined with targeted support to vulnerable groups.

Modernizing the Korean Welfare State analyzes recent developments in social and public policy in South Korea. Its focus is the new approach to Korea's system of social protection, known as the productive welfare paradigm. This volume brings together an international group of scholars to examine the new paradigm and associated policy developments. In the first part, contributors examine the significance of the productive welfare paradigm and recent policy developments within a broader comparative and international perspective. They question the commitment to welfare in the paradigm, viewing it largely as an example of a global trend towards the "enabling state" in which social welfare serves largely economic goals. Other contributors situate the new paradigm in relation to globalization and its implications for national strategies of social protection developed in earlier times. The new departure in Korea is compared to European welfare state development, and contributors find it a bold attempt to fashion a comprehensive welfare state based on social rights. In the second part, contributors focus on specific issues and policy areas. These include the degree to which Korea has been following a "pro-poor" growth policy. They evaluate developments in the area of unemployment and work injury insurance. They review the progress of policies in the area of social insurance and assistance, and the American system of income support for low income earners and its lessons for Korean policymakers. Other contributors review the public pensions system in Korea, and environmental protection policies are discussed and the impact of those policies on the poor and people of color, who are disproportionately exposed to environmental hazards. Ramesh Mishra is emeritus professor of social policy at the School of Social Work, York University, Toronto. Stein Kuhnle is professor in comparative politics and head of the Department of Comparative Politics at the University of Bergen, Norway. Neil Gilbert is Chernin Professor of Social Services and Social Welfare at the University of California, Berkeley, and director of the Center for Comparative Study of Family Welfare and Poverty Research. Kyungbae Chung is former president of the Korean Institute for Health and Social Affairs (KIHASA).

Modernizing the Korean Welfare State analyzes recent developments in social and public policy in South Korea. Its focus is the new approach to Korea's system of social protection, known as the productive welfare paradigm. This volume brings together an international group of scholars to examine the new paradigm and associated policy developments. In the first part, contributors examine the significance of the productive welfare paradigm and recent policy developments within a broader comparative and international perspective. They question the commitment to welfare in the paradigm, viewing it largely as an example of a global trend towards the "enabling state" in which social welfare serves largely economic goals. Other contributors situate the new paradigm in relation to globalization and its implications for national strategies of social protection developed in earlier times. The new departure in Korea is compared to European welfare state development, and contributors find it a bold attempt to fashion a comprehensive welfare state based on social rights. In the second part, contributors focus on specific issues and policy areas. These include the degree to which Korea has been following a "pro-poor" growth policy. They evaluate developments in the area of unemployment and work injury insurance. They review the progress of policies in the area of social insurance and assistance, and the American system of income support for low income earners and its lessons for Korean policymakers. Other contributors review the public pensions system in Korea, and environmental protection policies are discussed and the impact of those policies on the poor and people of color, who are disproportionately exposed to environmental hazards.