TEHRAN– Facing post-war conditions and large-scale economic reconstruction requires the definitive protection of a country’s most critical asset: “specialized human capital.” In the face of major economic shocks and structural demand declines, the traditional and passive approach of governments often focuses on paying “unemployment benefits” after mass layoffs have occurred. This strategy not only imposes a heavy financial burden on the public budget but also leads to the waste of organizational skills, a decline in the national employer brand, and triple the cost of rehiring during boom periods.
An examination of South Korea’s historical experience during the 1997 financial crisis (IMF Crisis) shows that shifting the paradigm from “passive post-unemployment support” to “preventive employment stability subsidies” is the most effective solution for preserving the stability of corporate employment chains. This document attempts to explain the financial and legal structure of this successful international tool for potential localization within the country’s labor market decision-making system.
This report was prepared by the Iran-South Korea Chamber of Commerce to provide practical solutions for reconstruction without workforce reduction, aiming to transfer South Korea’s experience to Iranian economic enterprises in post-war conditions.
What do the statistics say?
Processed data from the Korea Labor Institute (KLI) and the OECD reveal the dynamics of macro labor market management at the peak of the crisis:
* Peak Crisis Control: South Korea’s official unemployment rate was at full employment levels of 1.2% before the shock. With the onset of the crisis, this rate jumped to an average of 7.0%, and in the worst month of the labor market (winter 1998) peaked at 8.4%, affecting 2 million people. However, smart interventions prevented the unemployment rate from reaching double digits.
· Sharing the Crisis Burden: The workforce, understanding the situation, accepted a 9.3% reduction in real wages and a 33.8% cut in bonus payments. This flexibility prevented the cash drain of enterprises.
* V-Shaped Economic Recovery: Preserving the human resource structure within factories meant that when the market recovery began in 1999, the Korean economy immediately returned to its production capacity ceiling without wasting time on advertising, hiring, and retraining processes, recording a stunning +10.7% jump in GDP.
Part One: A System Called “Paid Reduced Work Hours (Work Sharing)”
After the 1997 financial crisis, just as many countries were resorting to mass layoffs, South Korea chose a completely different path. They designed a system called “Work Sharing”; meaning that instead of firing workers, everyone’s working hours are temporarily reduced, and the government pays the wage difference. The result of this smart measure became a triple-win: the enterprise saves on wage costs, the worker keeps their job, and the government prevents a surge in unemployment by paying subsidies.
Part Two: Layoff as a Last Resort, Not the First Choice
Alongside financial incentives, South Korea also designed a strict legal framework. According to the country’s labor law, layoffs are permitted only when four essential conditions are met: First, the enterprise must prove it is in a severe crisis and would go bankrupt without layoffs. Second, the employer is obliged to try all alternative solutions first, such as reducing working hours, unpaid leave, retraining, and using government subsidies. Third, the selection of workers for layoffs must be completely fair, and under no circumstances should contract workers or union members be the first victims. Fourth, the employer must negotiate with worker representatives for at least fifty days in good faith to seek an agreement. The enforcement of such regulations prevented arbitrary and mass layoffs.
Part Three: An Agreement that Worked
In South Korea, many creative and practical solutions have been implemented between employers and workers that are also applicable to Iran. These include the company “Solidarity Fund,” where workers and employers voluntarily deposit a portion of their wages or profits to rehabilitate struggling enterprises without layoffs. Also, flexible rotating shifts, where work teams are divided into groups that work every other week or month, and during off-weeks participate in rehabilitation training courses. Another method is the temporary transfer of workers between enterprises: companies with reduced activity send their temporary surplus workers to companies in the same area that need labor; after the crisis, workers return to their original company. Another successful solution is converting overdue wages into company shares, which both preserves the company’s liquidity and makes workers partners in the reconstruction.
Part Four: The Active Role of the Workforce
In the South Korean model, workers are not just spectators of the crisis; they play an active and responsible role in preserving the enterprise. Voluntary acceptance of reduced working hours as an alternative to laying off colleagues is one of the biggest signs of this solidarity. Korea’s experience shows that teams that collectively decide to work fewer hours so that no one gets laid off emerge from the crisis much more cohesive and productive than before. Additionally, forming reconstruction advisory teams composed of worker representatives and company managers provides creative solutions for utilizing existing capacities. Participating in free multi-skilling training courses transforms workers into far more valuable assets in exchange for keeping their jobs. Finally, proposing to convert overdue debt into an amicable installment plan with zero interest and a defined repayment period, instead of filing lawsuits and shutting down the company, demonstrates the maturity of labor relations in this country.
Part Five: Three Golden Principles for Sustainable Understanding
South Korea has formulated three fundamental principles for creating sustainable understanding between employer and worker in crisis situations. The first principle is complete information transparency. In reconstruction situations, secrecy is the greatest poison. Managers must share financial statements, the extent of damages, and reconstruction plans with the worker council. Experience shows that when workers see the situation is genuinely difficult, they step up themselves. The second principle is the fair distribution of hardship. Managers should never receive bonuses while workers are laid off. In successful Korean companies, senior executives cut their salaries by fifty percent during the crisis, while workers only endured a ten percent cut. This fairness creates lifelong loyalty. The third principle is celebrating small victories. Every step taken toward reconstruction, even if small, should be celebrated with all workers to keep hope and motivation alive in the team.
Conclusion: Reconstruction With Human Resources, Not Without
Workforce reduction in post-war conditions deals the heaviest blow to both the enterprise and the country. South Korea’s experience clearly shows that enterprises that preserve their skilled and experienced human resources during difficult times return to the field with greater strength and speed when the crisis ends. But enterprises that resort to premature layoffs lose their precious human capital and pay many times more to hire and train new personnel after the crisis. Today, Iran needs every hand, every skill, and every heart. The South Korean model clearly shows that understanding between employer and worker is not just an ethical slogan but an intelligent economic strategy for reconstruction. Work-sharing systems, solidarity funds, rotating shifts, temporary worker transfers, converting wages to shares, and fifty-day negotiations are all tools that have proven in practice that one can emerge from the deepest crises without layoffs and rebuild the country.
Facing post-war conditions and large-scale economic reconstruction requires the definitive protection of a country’s most critical asset: “specialized human capital.” In the face of major economic shocks and structural demand declines, the traditional and passive approach of governments often focuses on paying “unemployment benefits” after mass layoffs have occurred. This strategy not only imposes a heavy financial burden on the public budget but also leads to the waste of organizational skills, a decline in the national employer brand, and triple the cost of rehiring during boom periods.
This text is a summary of the report “South Korea’s Solution for Preserving Human Capital in Crisis Conditions,” recently published by the Joint Chamber of Commerce of Iran and South Korea. For the full report, please visit the Iran-Korea Chamber of Commerce website at www.irko.org.
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: tehrantimes.com
