The Demonstrations in Seoul: The Labor Backstory

November 16, 2015 7:00 AM

The massive demonstrations in Seoul reflect a coalition of political forces. Among those hitting the streets were those agitated by the textbook controversy and South Korea’s aggressive policy of signing free trade agreements (FTA’s), including President Park’s stated intention to join the TPP and an agreement with China that has increased farmers’ anxiety. But there can be little doubt that the core of the protests—and the capacity to turn out people in the street—can be traced to the Korean Confederation of Trade Unions and its opposition to Park’s intention to push through the most wide-ranging reforms of the labor market since the Asian financial crisis.

The problems with the Korean labor market are pretty well known; an IMF study runs through the low female participation rate and high youth unemployment, with its devastating consequences for new labor market entrants. But the most pressing problem is increasing dualism, which is the outgrowth of a complex of issues that range from the protection of insiders, to liberalizing moves that allowed the hiring of irregular workers, to low pension replacement rates that force retirees into low-wage informal work. In the 2014 World Economic Forum World Competitiveness index, Korea ranked 86th in labor market flexibility, along with countries including Ukraine, Haiti, Colombia and Zambia. The IMF report is worth quoting at length:

“This dualism stems from the high protection afforded regular workers, which leads firms to hire less costly non-regular workers. The latter are not provided with adequate training, which negatively impacts productivity. Moreover, because of high wage costs due to the seniority–based wage system (with the length of tenure in firms peaking at about age 50), many firms tend to push workers to retire before their mandatory retirement ages (which averaged 57 years in 2010), either through providing them less favorable working conditions (such as undesirable jobs) or through pecuniary incentives. Given the low pension replacement rate, such workers tend to become non-regular workers or self-employed in low productivity service industries.”

In September, a tripartite body—although one not directly incorporating the more militant of the two union confederations—reached a preliminary agreement on labor market reform. The reform would introduce a wage peak system: older workers would swap an extended retirement age for fixed salaries regardless of their seniority. The reform would also relax conditions for the termination of workers, increase the use of temporary contract workers introduced during the crisis in 1998 and thus reduce job security in all labor sectors. But perhaps the most important measure was to allow employers discretion to change regulations without consultation with workers. With unionization in Korea at US levels—only 10 percent of the workforce—this challenge to union prerogatives proved the last straw.

Enter the Korean Confederation of Trade Unions (KCTU) and its charismatic leader Han Sang-gyun. After a prolonged and confrontational labor action at a Ssangyong Motor Plant in 2009, Han was arrested and spent three years in jail. Almost immediately on his release, he undertook the amazing publicity stunt of climbing an electric transmission tower and camping out for over 150 days in the dead of winter, forcing the political class to take positions on the Ssangyong strike. A fascinating interview at Foreign Policy in Focus shows how Han subsequently ran for the presidency of the KCTU—a classic insiders’ union federation—on a platform of calling a general strike. The KCTU appears to have been critical for the large turnout—at least 70,000 since that is the government’s estimate—over the weekend.

Hankyoreh outlines the bullying approach of the Park administration to the protest itself, laced with explicit threats to arrest participants on the slightest pretext; as this is being written, about 50 have been detained and the government is promising to track down more. The administration has announced its intention to exploit the window before the National Assembly elections in April to push through this and other reforms.

Despite our sympathy with the Korean working class, the fact of the matter is that reforms are sorely needed. But not simply of the liberalizing sort. Inequality is rising in Korea at a rapid clip—as we will show in a subsequent post—and any relaxation of protection for insiders needs to be accompanied by an expanded social safety net—particularly for part-time workers—and training for them as well. Too much of the discussion is focused on efficiency concerns, and the need to address the slowdown in exports, the challenges of ongoing liberalization and growing integration with China. But as the protests show, the problems facing Korea at the moment are not simply economic but political. The last thing the country needs is the kind of destructive political polarization that is paralyzing the US.

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Stephan Haggard Senior Research Staff

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