Resumen de Essays in labor and education economics in korea
The Korean economy has suffered from mismatches in the labor market that depend on various supply and demand factors. Due to the drastic expansion of education, labor force is one of the most educated in the world, but there are high levels of duality and segmentation in the labor market. These two trends have reinforced each other. As a result, agents modify their behaviors (families invest heavily in education; firms demand and treat different types of labors in a different manner; and labor unions play heterogeneous roles in the labor market), giving rise to inefficiency and inequality issues. Diverse policy measures have been implemented for decades to mitigate the problems; however, they have not been effective enough to address the challenges entirely.
This thesis has provided an analysis of the problems associated with the dual labor market structure and credentialism in Korea. Chapter 2 and Chapter 3 have evaluated the effectiveness of recent educational and labor policies aiming to alleviate the excessive private tutoring consumption and labor market duality, respectively. Chapter 4 has extended the discussion of Chapter 3 by focusing on the role of labor unions. In particular, it has provided a detailed analysis on the union wage premium and its implications.
In Chapter 2, I evaluate the effectiveness of an education policy in Korea that regulates operating hours of private tutoring academies, called hagwon, to reduce private tutoring consumption. Successive Korean governments have attempted to limit private tutoring consumption for more than four decades; however, any of these policy measures has not been effective. This chapter focuses on the latest policy measure that directly regulates the supply side of the private tutoring market. Since 2009, 16 provincial education offices have placed a restriction on operating hours of hagwon in their ordinances. Since then, some regions have strengthened their initial curfew while the others have maintained the initial curfew. We take advantage of these shifts to identify the treatment effect by using an extended version of differencein- differences estimation. Our findings suggest that strengthening the curfew does not generate a significant reduction in the time and money spent on private tutoring. However, the results are heterogeneous by school level and socioeconomic status. High school students whose demand for private tutoring is inelastic, increased their consumption of alternative forms of private tutoring such as one to one type tutoring when their consumption on hagwon type tutoring had to be limited. This substitution was more intense among lower income high school students, suggesting that strengthening the curfew may have a negative impact on the equality of educational opportunities.
Chapter 3 deals with equal treatment legislation in the dual labor market. In this chapter, I examine whether and how labor market duality can be alleviated through legislation that prohibits discrimination based on employment type. In 2007, the Korean government undertook a labor reform banning discriminatory treatment against fixed-term, part-time, and dispatched workers. By exploiting a gradual implementation of the anti-discrimination law by firm size targeting a subset of non-regular workers, I identify the treatment effects of the anti-discrimination law, taking a difference-in-difference-in-differences approach to the 2007- 2010 waves of the Economically Active Population Survey. The results suggest that the anti-discrimination law leads to significant increases in hourly wages and the probabilities of being covered by national pension, health insurance, and employment insurance for targeted non-regular workers in small firms, relative to other workers. Anticipatory behaviors of employers and selective transitions of employees in response to the implementation of the anti-discrimination law do not underlie the estimated effects. The presence of labor unions contributes to reducing gaps in labor conditions between regular and targeted non-regular workers. The findings suggest that policies imposing legal burdens on firms for unjustified discriminatory treatment can make a non-negligible contribution to alleviating labor market duality.
Chapter 4 extends the discussion of the second chapter paying particular attention to the role of labor unions. We study the union wage premium in Korea. Most of the literature on the union wage effect has relied on a comparison of wages between union members and nonmembers not fully considering the fact that non-members constitute heterogeneous groups of workers. Using the 2007-2016 waves of the Economically Active Population Survey data that contain detailed information on individual worker’s union status, we disentangle the overall union wage effect into the heterogeneous effects by taking different types of non-members groups into consideration. In addition, using quantile regression models, we examine how the union wage effects vary across the conditional wage distribution. The results show that voluntary non-members experience a marginal wage penalty while the wage penalty for involuntary non-members is substantial. This implies that the union wage premium is likely to shrink by removing regulations limiting non-regular workers from joining labor unions. The evidence from quantile regression indicates that wage premium is the highest at the lower decile and is the lowest at the higher decile in the public sector, which suggests that labor unions operate well, with respect to reducing wage inequality, only in the public sector.
To conclude, policymakers should be aware of that the problems analyzed in this thesis are all interconnected and could be alleviated by reducing the relative advantages of agents’ modifying their behaviors. In this regard, breaking the dual structure of the labor market could generate a domino effect, and thus should be a starting point for addressing the problem. Given that the social security system in Korea does not guarantee sufficient support and social benefits in situations of need, a successful labor market entry by getting a regular job is still believed as the best way of securing life time income. Thus, focus should be on reducing uncertainty in the society. Policies that strengthen the social safety net will help reduce the relative advantages of being a regular worker, graduating from an elite university, and taking high quality private tutoring. It is obviously a difficult long-term task.
However, such effort to move toward a society with low uncertainty would allow Korea to promote sustainable growth as well as social cohesion.
