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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 35, No. 2, pp.131-158
ISSN: 1225-0279 (Print)
Print publication date 31 May 2022
Received 30 Nov 2021 Revised 15 Apr 2022 Accepted 19 Apr 2022
DOI: https://doi.org/10.22904/sje.2022.35.2.002

Effect of Irregular Worker Protection Law on Welfare Benefits Payment

MyoungHwan Kim ; GiSeung Kim
MyoungHwan Kim, First Author, Policy Analyst, Economic Social & Labor Council, S-tower F8, 82 Saemunan-ro, Jongno-gu, Seoul 03185, Rep. of KOREA, Tel: +82-2-721-7153 hwaniyam118@gmail.com
GiSeung Kim, Corresponding Author, Professor, Department of Economics, Pusan National University, 63 Busandaehak-ro 2, Geumjeong-gu, Busan 46241, Rep. of KOREA, Tel: +82-51-510-2564 gsk@pusan.ac.kr

JEL Classification: J08, J32, J42

Abstract

Since the 1997 Asian financial crisis, the polarization of wages and welfare benefits by the type of employment contract in the Korean labor market has intensified. The Korean government enacted the Irregular Worker Protection Law (hereafter denoted as IWPL), which focuses on non-discrimination in 2007. From the characteristics of personnel management in Korea, a hypothetical mechanism can be proposed that companies ensure long-term and stable employment in the internal labor market by suppressing the expenditure of welfare benefits, a type of quasi-fixed labor cost, in response to IWPL. To test this hypothesis, we construct the treatment group with similar characteristics to the comparison group through propensity score matching (hereafter denoted as PSM). Then, the difference in difference (hereafter denoted as DID) is performed on two matched groups. As a result of the analysis, IWPL is confirmed to have a negative effect on welfare benefits payment, and this reduction effect gradually increases with the passage of time. Finding shows the possibility that companies have minimized the negative employment effect of IWPL and protected the internal labor market by adopting personnel management that reduces quasi-fixed labor costs such as welfare benefits.

Keywords:

Welfare benefits, Quasi-fixed labor costs, Self-selection bias, Matched DID

Acknowledgments

We thank the anonymous referees for their constructive comments and suggestions. This paper is the revised version of Ch.5 in the first author’s doctoral dissertation.

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