Economic Crisis and Industrial Relations in Korea

JUNG Ee Hwan

1. Introduction

The aim of this report is to analyse the change of Korean industrial relations under the impact of current economic crisis. There are some reports and articles on this issue, but those are generally addressing the labor politics at macro level. We are mainly interested in the change of industrial relations at enterprise level.

2. Labor disputes and compromises.

We are witnessing the increase of labor disputes under current economic crisis. The number of strikes, which had been less than 100 a year in the mid-nineties, went up to be 129 in 1998, and 191 as of December 10th in 1999 according to the Ministry of Labor. Moreover, there were many short-term strikes and demonstrations which are not included in the official strike statistics. We may say that there are an upsurge of class struggle in Korea under economic crisis. This increase of disputes is due to the fact that the employment stability of full time workers has begun to be threatened seriously for the first time since 1987. Almost all the large companies downsized considerable number of workers.

The increase of strikes, however, is limited. The number of strikes in 1999 is less than those in 1991 and 1992, when the Korean government regarded industrial relations as 'peaceful'. This shows that many unions and employers came to compromises in downsizing labor force.

There were some conditions that made this compromise possible. The first is that employers did not attack unions by unfair labor practice or violation of collective agreements. There are some cases that employers used downsizing as a way of oppressing unions. But employers were generally interested in downsizing itself. The second is that employers did not force involuntary lay-off to union members. Though many non union members, such as middle managers and temporary workers, were involuntarily laid off, union members were generally protected from involuntary lay-off. The third is that the 'peripheral' workers, such as temporary workers and the workers employed in sub-contracted companies, were used as bumpers for employment stability of full time workers. Unions generally did not intervene in involuntary lay-off of non-union members. The fourth is that employers and unions exchanged temporary wage cut and employment stability.

This compromise, however, is not stable. Employers are not satisfied with limited employment flexibility. Unions want higher employment security and wage increase. Labor disputes may continue to increase.

3. Power relations at enterprise level

The power of unions compared to employers at enterprise level has been weakened under economic crisis. Main reason is that the employment security, which had been a source of union power, has been weakened. Workers generally worry about the possibility of being laid off even though unions managed to succeed in protecting members from involuntary lay-off. Moreover, as laid-off workers were selected by employers in case of involuntary lay-off, workers hesitate to participate in union activities for fear of giving bad images to employers.

The most conspicuous change in industrial relations is the considerable decrease of labor protest at the work place level concerning working methods and work load. One of the characteristics of Korean industrial relations had been the intensity of informal 'effort bargaining' and disputes at work place level. These bargainings and disputes were led by shop stewards and active union members. But these informal bargaining has almost disappeared under current economic crisis. Employers have become quite stubborn in carrying out their plan to change work organization and to speed up production.

But we cannot exaggerate the weakening of unions. Workers are still willing to be mobilized by unions to protect themselves. Unions which seemed to had been seriously weakened after big clash against employers are regaining their power. In Hyundai Motor Co., where union seemed to have lost their power after big dispute in 1998, majority of members voted for strike in 1999. Union went on strike and white collar workers were quite active in this strike. There are many other unions which have become stronger after economic crisis.

The fact that there have been few changes in collective agreements also shows that union power is still quite strong at enterprise level. Unions succeeded in resisting employers' attempt to change collective agreements to their advantage.

In sum, though we can see a tendency of weakening of 'democratic' unions, we can also see a tendency of strengthening of unions, especially in white collar sectors.

4. Internal labor market and work regulations

One of the features of Korean industrial relations at enterprise level is the internal labor market based on the principles of seniority and equality. Wage scheme based on seniority is the best example. Employers, who had tried to change this situation, are using their enlarged power to introduce wage system based on merits and performance. They made some progress, especially in white collar sectors. But the introduction of merit based pay is still partial and limited. There are many companies which have introduced merit based pay recently, but this generally applies to managerial workers who are not union members. Seniority based pay is still the most common wage scheme for union members.

Unions had some rights to intervene in work rules and employment issues. But these right were generally limited to consultation, not co-determination. Under economic crisis, these rights were not quite helpful for unions to protect workers.

5. Some comments and prospects

Firstly, Korean unions still have power at the enterprise level. Confrontational industrial relations will persist. But the fact that union members have become more selective in participating union activities may change the unions' way of confronting employers.

Secondly, even though there were many severe disputes concerning downsizing, the strategic choice of employers and unions were quite pragmatic. This was a precondition of compromise under economic crisis.

Thirdly, institutionalization of union rights is important for unions. The informal practices of industrial relations had been an important part of industrial relations in Korea. But these practices proved to be almost helpless in protecting workers from downsizing and speed up.

Fourthly, Korean industrial relations system was somewhat functional in protecting full time workers in large companies under economic crisis, but it was almost helpless in protecting peripheral workers. Comprehensive unions, bargainings and agreements are necessary. But it may need some kind of cultural renewal among union members in large companies.