COVID-19 and mass layoffs

Preemptive move needed to prevent sweeping job cuts

The worst fears about mass layoffs resulting from the coronavirus shock have become a reality. one of the sectors hit hardest is the aviation industry ― low-cost carrier Eastar Jet is reportedly planning restructuring measures which will affect 750 employees, about 45 percent of its workforce.

The company will start to receive applications for voluntary retirement, and if the number of applicants falls short of its target will carry out layoffs. Eastar Jet will not be alone in planning to clear out redundancy. Korean Air has placed all 387 of its foreign pilots on unpaid leave for three months. If things get worse, the national flag carrier is set to cut the pay of its entire staff, and also have them take leaves of absence in rotation.

Larger businesses can ill afford to remain complacent. Doosan Heavy Industries & Construction, which recently escaped a financial crunch thanks to the state-run banks' emergency loan of 1 trillion won ($814 million), has few other options but to reduce its workforce. The situation facing affiliates of family-run conglomerates is not much better, as their ability to withstand the crisis have been sharply weakened. According to the Korea Exchange, aggregate sales of major listed companies edged up 0.47 percent last year, but their operating and net profits plunged 37 percent and 53 percent, respectively. Their poor financial performance will lead to cost cuts and personnel trimming, dealing massive blows to their suppliers.

The government is not sitting idly by, though. Policymakers have come up with a 100 trillion-won package to help employers retained their workforces. At most industrial sites, however, businesspeople are calling for a more fundamental solution, urging the government to expand the scope of beneficiaries and raise the amount of financial support drastically. They have also called on the Bank of Korea to inject sufficient liquidity into the market to prevent large companies from going belly up due to a temporary cash crunch.

This is time for the government, workers and management to seek a trilateral compromise, in which employers minimize layoffs in return for the government's financial support, and unions show more flexibility in their demands for higher wages and better working conditions.