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Profiling in the Korean labour market

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Workers from the Korean Confederation of Trade Unions (KCTU) protest in Seoul, South Korea, 1 May, 2015 (Photo: Reuters/Kim Hong-Ji).

In Brief

Korean workers are overworked, dissatisfied, and have the highest suicide rate in the OECD. At the same time, their productivity lags behind that of workers in other OECD countries. Evidence suggests that Korean employers do not provide their workers with an environment conducive to productivity nor do they match workers to well-suited jobs.

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Korean employers hire workers based on outdated selection criteria with little bearing on healthy, productive labour relations. In their hiring decisions, employers consider applicants’ family background and personal lifestyle — characteristics that are at best weakly associated with productivity. This selection process potentially violates equal opportunity laws and leads to employers matching applicants to jobs based on the wrong criteria, discouraging workers from investing in useful skills.

A core impediment to understanding the scope of this mismatch is the reluctance of human resource staff to discuss their organisation’s recruiting practices. To gauge the extent of hiring screening practices across Korean firms and the motivation and consequences of these practices, we can only rely on information from job application forms.

51 per cent of Korean firms screen applicant height and weight and 57 per cent screen for family background. A large group of firms also screen for eyesight, birthplace, religion, marital status, blood type, family financials and achievements during military service. Some ask about relatives in North Korea, left-handedness, or shoe size to ensure that candidates will fit into company uniforms.

Industry groups argue that screening for personal characteristics helps firms better predict candidates’ soft skills, such as integrity, dedication, sociability or ability to work in a team. But personal characteristics have a limited predictive power over an applicant’s skill set. Firms practicing extensive screening have no more highly experienced workforces than other firms and appear to be less profitable. The signals from screening are noisy and each additional question is less and less useful. Companies that use extensive screening processes also tend to hire fewer women than companies that screen less.

Intrusive screening is also costly. Beside the costs of collecting, managing and analysing vast databases of applicant information, there are also associated risks to factor in, such as potential legal challenges, tensions with labour unions, or backlash from international customers. Some commonly asked questions are illegal per se, even if enforcement is lax. By forcing applicants to reveal uncomfortable details about their personal backgrounds employers also face the risk of alienating applicants with high ethical standards.

The majority of Korean employers ask an average of four questions about personal factors, these questions range from physical appearance to general health. But only some firms screen for ethical predisposition, family history, community ties or lifestyle choices. Intrusive questions that tease out an applicant’s peripheral skills are only asked after all other questions have been exhausted.

Only 13 out of the 189 Korean firms surveyed asked about eyesight without questioning applicants’ appearance. And only 4 out of 176 forms surveyed health without surveying appearance or eyesight. It seems that the content of one question informs the content of follow-up questions in a hierarchical fashion.

Korean firms’ screening processes appear related to conditions in relevant labour markets. In sectors with long working hours and high mandatory compensation and recruiting costs, firms undertake more rigorous screening as more is at stake during hiring. In contrast, firms in sectors with high discretionary and bonus pay are better able to mitigate potential losses from misdirected hiring and so screen less.

The degree of unionisation among existing workers also determines the extent of screening, with a high degree of unionisation leading to more extensive screening of newcomers. This suggests that unionised firms screen out workers who would be troublesome or difficult to fire. But another explanation could be that unions are propping up firm screening practices to protect their own membership numbers.

There is a complex relationship between firm reliance on applicant screening and their type or size. Korean chaebols (large business conglomerates) typically rely on less intrusive screening practices than small and medium size enterprises as they face tighter regulation and greater goodwill to protect. But once firms grow large enough to hire expensive regular workers (or to have a unionised workforce), they also start screening additional characteristics to determine a worker’s long-term loyalty or their interest in labour activism.

Regulators can intervene to help job applicants without adversely affecting firms. Stomping out the most intrusive screening questions — such as those about blood type, home town, family and financial situation — by introducing enforceable legislation may be straightforward if firms are already indifferent about practicing it.

Policymakers can also alleviate the need for excessive screening by instituting protections against worker transgressions. These could include traineeships for disadvantaged applicants, penalty or civil liability for worker-caused accidents, strict enforcement of non-compete clauses, or a worker warrantor system. Given the potential risks of asymmetric information and employer–employee mistrust, greater regulatory involvement can benefit all parties in Korea’s troubled labour market.

Vladimir Hlasny is an Associate Professor in the Department of Economics at Ewha Womans University in Seoul, Korea.

This piece is adapted from a longer essay published in the Korea Economic Institute of America’s Academic Paper Series. The full-length essay can be viewed here.

2 responses to “Profiling in the Korean labour market”

  1. As a due diligence specialist regularly tasked with pre-hire and non-compete checks, I can say without qualification that examination of “applicants’ family background and personal lifestyle” as the author cites is of supreme importance.

    While these criteria may not be perfect predictors of job effectiveness, they are absolutely crucial in corporate security, risk mitigation, and the protection of corporate intellectual property as well as more tangible assets.

    An irresponsible lifestyle is a high quality predictor of future financial problems even if a debt burden doesn’t already exist. And the need for fast and untraceable cash often precedes employee theft.

    By the same token a family background in a related commercial field often presages a theft of intellectual property including industrial processes and formulations as well as supplier and client lists. This form of soft industrial espionage occurs far more often in Asia than most hirers or outside recruiting firms will admit.

    • You wonder how many upper middle-class people and wealthy people put their companies and their nation in jeopardy with their irresponsibility both as professional and private people. You look at how Governor Rick Scott of Florida cheat the American taxpayer of billions of dollars while he was the CEO of HMO and got off with no prison time and he did not have to reimburse the US government out of his own pocket.

      In addition, many of these people go off to work for the government in areas where they are totally unqualified to lead or even if they were qualitifed, their past work experience tells you that they are not fit to lead a government agency because they will prevent it from job that it was set up to do. The US Bureau of Land Management and the Security Exchange Commission are perfect examples were the top leaders appointed by an incompetent president and confirmed by an incompetent Congress which lead to the Gulf Oil spill disaster and the economic meltdown on Wall Street in 2008.

      The Bush Family and Don Trump are perfect examples of the excellent examples of this sad state of affairs.

      If you don’t want people to be irresponsible regarding their spending, then you need to pay them more, educated them about responsible financial budgeting and/or stop forcing them to keep up with the Jones. Also, cut out all these drinking sessions that Korean workers and their bosses do after work. You save a lot of money not spending on drinks. Also, stop raising the prices of goods and services along with trying to maintain the basic necessities of life such as paying bills, putting a roof over their heads, etc. All these things would cut down on employee theft. Of course, you need to crackdown on the bosses since many of them think that their companies are their own private bank account and then expect the workers and the government to bail them out.

      These companies need to invest more in their workforce if they want people to have the right qualifications and the companies and the government need to reform their educational/vocational programs if they want to maintain a high-quality workforce; however, they still need to pay the workers better wages instead of being cheapskates.

      The companies in the USA need to do a much better job of vetting their people who move up the corporate ranks and/for managers/CEOs who come from other companies. The problem is that many CEOs at one company sits on the board of directors at other companies which means that the CEOs can not police themselves and hold each other accountable.

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