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KOREA'S CHANCE WITH LABOR
By
Charles S. Lee in Seoul
Far East Economic Review
November 4, 1999
t was Korean labour's biggest defeat. Striking subway workers had rocked Seoul for a week in April when the government delivered its ultimatum: Resume work immediately or be fired. Within days, they gave up. South Korean organized labour, once the most feared in Asia, was suddenly on the run.I
Today, even with the economy improving, there are few signs that the labour unions are regaining their clout. On the contrary, the financial crisis has forever shattered one of the cornerstones of union militancy--the notion of lifetime employment, long taken for granted, which allowed unions to organize frequent strikes without fear of workers losing their job. The crisis has also left policymakers and public alike with a diminished tolerance of union militancy. As a result, union power looks set to wane for the first time since it burst to prominence as South Korea began its transition to democracy in 1987.
"We're facing a watershed," admits Choi Dae Yeul, a spokesman for the Federation of Korean Trade Unions, one of the two national umbrella labour organizations. "How we proceed from this point will be decisive for the labour-management relationship."
That's not to say the militants are flat on their backs. Indeed, there may be an increase in labour unrest in coming months as unions try to claw back some of what they lost in the recession. But with the lifetime guarantee gone, and unemployment likely to stay relatively high despite an accelerating recovery, militancy has probably reached its high-water mark. That could present South Korean industry with a golden opportunity to carry through important changes that will make companies more competitive. Key among these will be the ability of employers to trim bloated workforces and to be more flexible on pay.
For the unions, too, this could be a turning point, as some of their own officials appear to acknowledge. As jobs have been lost during the crisis, union membership has slumped--in 1998 it fell 5.5% to 1.4 million from a year earlier, according to government figures. (Union membership is concentrated at big companies--but this is also where strikes have in the past caused most disruption to the economy.) Although membership may recover somewhat with the economy's rebound, it's likely to stay under pressure as South Korea shifts from labour-intensive manufacturing to capital-driven services, which typically are the province of smaller companies whose workers are less easy to organize. "The old mould has definitely been broken," says Richard Samuelson, head of research at Warburg Dillon Read in Seoul.
Some labour leaders, though clearly not ready for surrender, recognize that the blunt instrument of strikes and confrontation has had its day. "We realized through this crisis that we must not only stand up against the government and employers' repression, but also need to build an effective capacity to develop policies and vision that can shape the society," says Yoon Young Mo, international secretary of the Korean Confederation of Trade Unions. Labour leaders are now setting up their own political party to fight their cause.
In the short run, labour disputes might actually pick up as the economic recovery gathers pace and workers try to reclaim the wage levels they gave up during the recession. This is already happening. Thanks to first-half economic growth of 7.3%, the average monthly salary has climbed 8% from a year earlier to 1.5 million won ($1,260). Fears of redundancy have also faded, with unemployment dropping to 4.8% in September from a peak of 8.6% in February. "Demands to reclaim past concessions are now surfacing," says Rhey Hai Hyuck, personnel director at Poongsan, a leading maker of copper pipes. "We think next year could be a dangerous one."
Workers certainly have much to be frustrated over. Last year unions were forced to accept pay cuts for the first time in recent memory. According to LG Economic Research Institute, nominal wages fell 2.5% on average in 1998, compared with a rise of 11% in 1996, before the economic crisis hit. Although the jobs situation has improved, many of the estimated 1.5 million people laid off during the crisis have yet to find work.
It was this growing sense of victimization that propelled April's subway strike. Led by members of the hawkish Korean Confederation of Trade Unions, thousands of Seoul subway workers stopped work on April 19. They demanded that subway authorities scrap a plan to lay off almost 2,100 employees, or 18% of the workforce, at a state firm that had posted losses. Instead, the unionists offered to reduce working hours in order to share jobs among all employees--but didn't offer wage cuts.
The bigger problem, as the government saw it, was that the unions were trying to roll back the principle that surplus workers can be laid off--a right companies had won in February 1998 after negotiations in the Tripartite Commission, a body bringing together the government, labour and employers. Digging in its heels, the government told the subway workers they would be fired and held personally responsible for the costs of the stoppage if they didn't resume work. The strike fizzled.
Still, the strike wasn't a complete failure. The government has so far not pushed ahead with the lay-offs. President Kim Dae Jung also has stepped up a crackdown on the financial shenanigans of corporate tycoons--a perennial complaint of labour activists, who say such action is just as important as streamlining companies. In recent weeks, government prosecutors have arrested a top Hyundai Securities executive on charges of stock manipulation and the owner of the JoongAng Ilbo newspaper on allegations of tax evasion, and have begun investigating the family that owns Korean Air. Another key labour demand--expanded unemployment benefits--has recently been submitted for legislative action.
The president may be angling for more votes for his ruling coalition in next April's national assembly elections. But in the greater scheme of things these moves are small comfort for labour activists. Now they too must look to the political arena to uphold their interests.
They're pinning their hopes on the Democratic Labour Party, which they plan to launch in January to field their own candidates in the elections. Led by Kwon Young Gil, a long-time labour activist who won 1.2% of the vote in the 1997 presidential election, and backed by the unions' organizational muscle, the party will be the first political entity in which trade unions can legally participate (a right granted in the same law that allowed lay-offs). Its platform most likely will include demands for more social-welfare spending and reduced working hours.
Will it succeed? "If it can elect even one or two assemblymen, labour problems could receive much more spotlight in the legislature," says Lee Jeong Taik, a Labour Ministry spokesman.
That, however, would be just a beginning. Given the depth of animosity and mistrust between labour and management, the healing process will take time. In the meantime, labour discontent at many workplaces continues to hold back productivity. Recent studies by LG Economic Research Institute and Hyundai Research Institute found little evidence of sustainable gains in productivity despite the painful restructuring South Korea has undergone in recent months.
The fate of the Tripartite Commission is also troubling. Earlier this year, labour and management pulled out of the landmark forum, both questioning its impartiality. Although the Federation of Korean Trade Unions and the Korea Employers Federation have since returned to the table, the Korean Confederation of Trade Unions says it has no such plans. Unless the impasse is broken soon, South Koreans--both workers and bosses--may discover they have blown their best chance to build more-harmonious industrial relations and a more competitive economy.
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