The government should take the lead in reforming the labor market if both labor and management are unable to come up with a mutually satisfactory compromise, former German Chancellor Gerhard Schroeder said Thursday.

Schroeder, who is well-known for his domestic labor market policies, is visiting South Korea to give lectures on his past experiences as chancellor from 1998 to 2005. 

"It is extremely difficult for management and labor to reach a compromise, and when these kinds of discussions fall through, the government needs to step forward," Schroeder said during a discussion on labor market policies in Seoul.

With the talks among the government, management and labor going nowhere, the former chancellor said it was "plausible" at the time for the German government to come up with its own solutions.

"I thought that my administration had the legitimacy to help safeguard and reform the nation's economy, and so we came up with several measures and passed those bills," he said.

In a move to reduce unemployment and help boost Germany's economic growth during his tenure, Schroeder unveiled a series of reform measures between 2003 and 2005 called the Agenda 2010.

Dubbed the Hartz plan, the measures called for a cut in unemployment benefits to entice people to get back into the workforce as well as increase labor flexibility by allowing for more part time jobs, among others.

South Korea is now faced with a similar problem as negotiations for a more flexible labor market have been stalled with unionized workers resisting the government's push to give corporate

management more leeway in laying off workers as part of efforts to improve its stagnant economy.

Although the policies may face opposition and criticism, the ex-chancellor said the government should accept the risks "for the sake of the nation's overall benefit."

"Without any risk-taking and courage to carry out one's convictions for the beneficial measures, any kind of reform efforts will make no progress," Schroeder said.

In regards to South Korea's youth unemployment rate, which reached an over 12-year high last month, Schroeder said the country should work to narrow the income gap between large conglomerates and small and medium enterprises (SMEs).

"Personally, I think the problem in South Korea is that the difference between getting a job at a global firm and an SME is too big," Schroeder said.

"When youths graduate from university here, everyone looks for a job at a multinational firm because of the large income gap between those companies and smaller ones," he added. (Yonhap)