Annual minuet of ritual labor
confrontation By David
Scofield
It's confrontation time again in South
Korea, the season when members of the country's two
giant umbrella unions take to the streets in their
annual fight for better wages, working conditions and
job security. The yearly ritual is virtually enshrined
in law, since South Korea's wage agreements are only for
one year. Autos and banks take center stage.
The
two major union umbrellas are the Federation of Korean
Trade Unions (FKTU) and the Korea Confederation of Trade
Unions (KCTU).
This year, like last, the outcome
of the Hyundai Motors strike, its union under the
umbrella KCTU, will set the stage for collective action
and ultimate agreements throughout South Korea's
unionized industries. Last year, the often violent
Hyundai strike dragged on for 45 days, costing the
company almost US$1 billion in lost production
This year, the strike was relatively
short-lived. Hyundai's union was demanding a 10.48% wage
increase and an employee bonus equivalent to 30% of
profits. The wage increase would have pushed Hyundai's
auto workers hourly rate to $27 an hour, $1 an hour more
than their counterparts in the United States.
The tentative agreement announced on Thursday by
Hyundai Motors includes a 6% increase in wages and an
"one-off" bonus of up to two month's salary. Though less
than originally demanded, the agreement will actually
increase Hyundai's labor costs by almost 14% this year
to $2.5 billion. Workers were to be back on the job
Friday.
The problem of rising wages is acute,
since these increases are out of step with South Korea's
major competitors in Japan and the United States, which
have experienced virtually flat-wage growth. And
expensive labor does not seem to be translating into
better vehicles. According to a report this week by JD
Powers and Associates, Hyundai and its smaller
subsidiary Kia, while ranking high on initial customer
satisfaction surveys, rank near the bottom on longer
term durability studies. Hyundai ranked 33rd and Kia
37th out of 38 brands on durability after three years of
use. These rankings and the wider perception it
encourages among global consumers that Hyundai vehicles
are "cheap, but not dependable", undermines the firm's
efforts to move up the global food chain by increasing
market share, brand value and customer loyalty.
While final settlement, after a membership vote,
may become reality for Hyundai on Monday, GM-Daewoo's
auto union voted 64% in favor of strike action on
Thursday. The GM-Daewoo union is demanding a 16% pay
hike and the reinstatement of those who were laid off
during GM's initial acquisition and restructuring.
Bank strikes present complicated
problems Collective action in the finance sector
is likely to be more complicated and protracted.
On June 25, KorAm bank employees went on strike,
demanding, according to union leader Kwon O-kyun, a pay
increase, guarantees of job security and a massive per
employee bonus equivalent to $129,000. The demands don't
end there. KorAm's union is also seeking a pledge by
KorAm's American parent Citibank (Citigroup acquired
97.5% of KorAm on April 30) not to de-list the firm from
the Korean Stock Exchange - a move they argue would make
the bank far less transparent, allowing Citigroup to
siphon the bank's profits offshore.
The fear of
greater foreign ownership within South Korea's financial
sector is not limited to the unions. The Bank of Korea
released a report last December that portrayed increased
foreign ownership of Korean banks as "worrying".
And the fear appears to be spreading. On
Thursday, the Federation of Korean Trade Unions (KFIU)
announced that employees of majority Citigroup-owned
Hanmi Bank also would be initiating a strike action. The
strike has come less than one month since the ministry
of labor announced it had mediated a settlement between
Hanmi's employees and Citigroup.
Depositors have
withdrawn more than $1 billion in deposits from both
KorAm and Hanmi Bank fearing a long, protracted dispute.
(South Korea's central bank has said it would intervene
and inject funds to prop up KorAm Bank if a run on
deposits severely depletes its liquidity.)
But
organized labor in South Korea, while vexing and often
seemingly self-defeating, was also at least partially
responsible for the country's democratization and
development in the mid-to-late 1980s.The unions worked
with student and religious groups in their challenge of
Korea's Fifth Republic, the authoritarian rule of
then-president Chun Doo-hwan.
Labor rights were
long suppressed, as leaders considered the economic
imperative to be development during this period. South
Korea's comparative advantage was its access to
lucrative markets abroad, coupled with strong state
control of credit allocation, imports and wage controls
at home. Protests and demonstrations in the mid-to-late
1980s empowered South Korea's growing middle class and
led not only to greater political freedom, but also to
substantial wage and benefit increases. It wasn't until
1996 under South Korea's first truly democratic
government of Kim Young-sam, however, that the labor
reform was fully addressed by the government. It was
also during the fall of that year that the government
passed legislation during a secret, middle-of-the-night
session of the National Assembly that would, for the
first time, allow South Korea's firms to implement mass
lay-offs. The legislation was ultimately watered down
after massive coordinated demonstrations were launched
across the nation.
Many analysts have commented
that had the lay-off legislation not been altered, South
Korea's firms would have been far better prepared to
deal with the financial crisis that wreaked havoc across
Asia a year later in 1997.
Can government,
management and labor cooperate? In 1998, in the
wake of the Asian currency crisis, the newly elected
government of Kim Dae-jung created a tripartite
commission in an effort to mitigate the antagonism
between labor, government and management - the latter
two, in the eyes of labor leaders - being one in the
same. The commission was designed to create what
hitherto had been absent in South Korea's
management-labor disputes: compromise and trust. But
achieving trust proved and still proves to be illusive,
and with confrontation historically proving more
effective than compromise, the success of the tripartite
commission has been limited at best.
President
Roh Moo-hyun again has committed to using the same
three-party structure, but with sharp fissures existing
both within and among South Korea's unions, and with
South Korea's largest firms preferring to settle things
independently, future projections are clouded.
Unfortunately, militant action is often
successful in South Korea, and this tends to reinforce
what can best be described as bad behavior. After
Hyundai Motor's union walked off the job last year, the
principle of "no-work, no-pay", which had been
considered the bedrock in all negotiations, was
effectively thrown out the window. Hyundai Motor did not
pay its workers while they were on strike, as all firms
had pledged not to do; rather, they did an end run
around the spirit of the pledge by giving its employees
a "harmony" bonus as part of the settlement. The bonus
equaled the wages the workers had lost during the
strike. The precedent set, this demand has surfaced
throughout the nation's unions. Further, the collective
agreements that ultimately result from these strikes
invariably include a clause absolving the union and its
members of criminal responsibility for destruction of
property, violence and other actions.
Of course,
not all of the unions' demands are unreasonable. Appeals
for greater social welfare funding, for example, do
reflect the sorry state of the nation's under-funded
social welfare programs. A constructive dialogue over
how a more comprehensive social welfare system might be
constructed through public and private contribution,
makes sense, though union insistence that every company
pay 5% of its pre-tax profits seems chimerical while
wages and labor costs continue to spiral upwards. The
tendency of South Korea's unionists to resort to
confrontation rather than compromise in pursuit of their
demands is weakening the nation's economic
competitiveness at a time when regional competition has
never been higher.
There is a veritable exodus
of small, medium and large South Korean firms moving
operations to China in a bid to escape huge wage
increases and militant union action. If the trend
continues, the unions could find themselves with less
influence and even their constructive demands will be
unmet as South Korea's firms head for the exits.
David Scofield, former lecturer at the
Graduate Institute of Peace Studies, Kyung Hee
University, is currently conducting post-graduate
research at the School of East Asian Studies, University
of Sheffield, United Kingdom.
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