"Since the implementation of the Yellow Envelope Act (amendment to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act), whether we can reach a settlement in negotiations with subcontractor unions has been shaking our entire business plan for this year. In an uncertain situation where it is unclear how far legal risks may extend, we dare not increase hiring of new regular employees, which would immediately become a burden on fixed costs." (Executive in charge of HR at a major manufacturing company)
The Yellow Envelope Act has surpassed 200 days since its implementation on the 25th. Approximately half a year after the long-standing demand of the labor movement—expanding the scope of employer status for prime contractors and limiting claims for damages from strikes—has been fully realized, the side effects of 'labor market rigidity and a cliff in new hiring' hidden behind the stated purpose of expanding labor rights are becoming a reality on the ground.
In particular, as the government and ruling party push forward with stringent pro-labor and corporate regulation policies, including amendments to the Commercial Act that expand directors' duty of loyalty, companies are further locking down 'new hiring gates' from a risk management perspective, leading analysts to conclude that this is directly worsening youth employment.
The most significant change on the ground since the implementation of the Yellow Envelope Act is the expanded scope of negotiation obligations and the full-scale exposure to legal risks due to the 'expansion of the employer scope.' Under the amended law, if a prime contractor 'substantively and concretely controls or decides' the working conditions of subcontracted workers, it becomes obligated to negotiate. Consequently, major corporations have been flooded with official requests for negotiations from dozens to hundreds of subcontractor unions.
According to an 'Enterprise Perception Survey on the Amendment to the Trade Union Act' conducted by the Federation of Korean Industries (FKI) among major companies at the time of promoting the Yellow Envelope Act, more than seven out of ten responding companies (72.9%) answered that labor-management relations uncertainty and legal risks would significantly increase due to the amendment. Now, 200 days after the law's implementation, it is analyzed that the concerns held by companies at the time have materialized on the ground.
Companies complain that this increase in legal risk deprives them of flexibility in workforce management. A representative from a major corporation stated, "With negotiation channels diversifying and claims for damages from strikes becoming practically difficult, we cannot determine labor costs, making it impossible to even formulate medium- to long-term hiring plans. Ultimately, we have no choice but to minimize new regular recruitment through public hiring and shift back to small-scale, continuous hiring focused on experienced professionals."
The hiring contraction caused by the pro-labor policy drive is also evident in statistics. According to 'August 2026 Employment Trends' released by Statistics Korea, while the total number of employed persons increased by 184,000 compared to the same month last year, most of this increase came from jobs for those aged 60 and over. In contrast, the number of employed youth (aged 15–29), representing the future generation, continued to decline consecutively for several months due to the ripple effects of hiring contraction, creating a stark contrast.
The youth employment cliff is directly linked to the reality that new regular hiring shrinks as union influence and collective bargaining power grow in major corporations. According to data from Hankyung (The Korea Economic Daily) analyzing the employment structure of major companies, in major corporations with strong union presence and high employment rigidity, the proportion of youth aged 30 and under in total employment has decreased by more than 13 percentage points over several years.
This is why experts point out that legislative drives centered on protecting existing workers' rights and expanding legal risks have ultimately created a 'vicious cycle of dual labor market structures,' raising the threshold for young job seekers trying to enter the labor market.
Experts and business leaders warn that the pro-labor policy drive, including the Yellow Envelope Act, fundamentally weakens companies' capacity to create jobs. Even if growth forecasts are adjusted, one of the core causes of 'growth without employment,' where job-creation effects fail to materialize, is precisely this kind of institutional risk in the labor market.
A representative from an economic organization pointed out, "If the pro-labor legislative drive continues without resolving employment rigidity and labor-management conflict risks in the labor market, companies will inevitably hesitate even more about new hiring. To achieve a practical solution to youth job issues, measures must be taken first to alleviate over-protection of existing regular employees and secure employment flexibility by increasing corporate incentives for hiring."
in ECONOMY
