The KCTU’s Fight against the Korean Government’s Labour Market Reforms
Korean Confederation of Trade Unions(KCTU)
In the context of the global economic governments around the world are seeking to push the costs of the crisis onto workers through the means of labour market reform. The Park government is following in this trend, seeking to respond to the prolonged recession by forcing through regressive labour policies including wage cuts, relaxation of the conditions for firing workers and expansion of precarious employment. Last September, the government took the lead in the conclusion of a labour[FKTU]-employer[KEF]-government agreement on such reforms. KCTU, of course, was exclude from this agreement. On the basis of this agreement, the government and ruling party have begun to announce various administrative directives regulating working conditions and are seeking the passage of labour law revisions. In response, the KCTU has put forth policy alternatives to protect the rights and livelihoods of workers and common people and is organising mass protests and general strike action for the months of November and December.
Background and Timeline of the Government’s Regressive Labour Reforms
The 2012 presidential elections were held in the context of economic crisis. As the candidate of the New Frontier Party, the party traditionally representing conservative forces and chaebols (large family-owned conglomerates), Park Geun-hye succeeded in using a promise to ‘democratise the economy’ - a discourse which tied together chaebol reform and expansion of the welfare system - to gain power. It did not take long, however, for the Park administration to show its true colours. Less than a year after her inauguration, President Park changed her discourse from ‘democratisation’ to ‘revitalisation’ of the economy and began to show a clear anti-labour pro-chaebol bias.
In 2014 the issues of the calculation of ordinary wages, working time and the extension of the retirement age arose as the three main industrial problems. It was at this point that the government and ruling party began to speak directly about structural reform of the labour market. In response to the three principal industrial issues, the government put forth a plan for restricting the scope of wages calculated as part of the ordinary wage and regressive revision of workplace regulations to allow for changes in wage scales and expansion of the Peak Wage System. At the same time, the government proposed measures for making employment more precarious such as relaxation of the conditions for firing poorly performing workers, expansion of the use of temporary agency employment and increase of the length of time employers can employ workers on temporary contracts. This was all done in the name of protecting precarious workers.
As there are no elections taking place in 2015, the government deemed this to be the perfect time to achieve its goals and, therefore has been driving forth is agenda since the beginning of the year. The attack on workers in 2015 has included ① an attempt to create a ‘grand social consensus’ on changes in ordinary wage calculations, working time and the retirement age regulations through agreement in the Economic and Social Development Commission (end 2014 - March 2015); ② attempts to intervene in wage and collective bargaining through administrative directives (April – August 2015); ③ attempts to push through regressive labour reforms though administrative directives and legislative revisions on the basis of the tripartite agreement (Sept. 2015 – present).
To justify this process, the government has asserted that flexibilisation of the wages and employment of organised, older, permanently-employed (regular) workers at large-scale enterprises is needed to protect young, precariously-employed (irregular) workers at small enterprises and increase jobs for young people.
The government’s assertion that protections for regular workers are excessive, however, is not based in reality. In 2013, South Korea scored 2.17 in the index measuring employment protection for regular workers. This was 0.12 below the average score for 34 OECD countries. In 2011 South Korean workers had worked in the same jobs consecutively for an average of 5.1, only one half of the OECD average (10.0 years), and shortest among 25 OECD countries. In countries like South Korea, were consecutive years of service are so short, most workers do not benefit from wage increases associated with seniority. The percent of workers whose retirement is guaranteed in both the public sector and large-scale private enterprises is only 5-10%.
In addition, the government’s assertion that its labour policies will create more jobs for young people does not hold up in reality. Research on employment rates in South Korea demonstrate that in order to increase the scale of employment the quality of employment has to be improved. The government’s plan for creating jobs, however, involves early retirement plans for teachers, the introduction of wage peak systems and other such measures that worsen the quality of employment as well as the expansion of low-wage part-time jobs through measures such as increasing the use of temporary contracts. To put it another way, the government’s labour reform, supposedly aimed at increasing the employment rate, is actually a plan to split good jobs up into bad ones in a process that will lower labour standards for everyone.
Problems with the Administration and Ruling Party’s Labour Policies
Against this backdrop, an agreement was signed by labour, employer and government representatives on 15 September. The next day, the ruling party announced is proposed revisions of the Labour Standards Act and four other labour laws calling them a ‘plan for the modernisation of the labour market’.
First, by calling for relaxation of the conditions need to fire workers and allowing employers to change workplace regulations at will, the tripartite agreement threatens workers’ right to livelihood and the basis for the existence of trade unions. The agreement, termed ‘clarification of the standards and process for termination of work contracts’, reiterates the ‘guideline on the standards and process for ordinary firing’, which the government has announced it will create. It also includes plans for legal revisions that will introduce performance-based systems for hiring, placement and promotion – in other words change the employment relationship into a system of outcome-based evaluations. In addition, the agreement stipulates ‘clarification of the conditions and procedures for revision of collective bargaining agreements and workplace regulations’, effectively abolishing the current legal requirement that workers collectively agree before workplace regulations are revised to their detriment. The goal of this change is to allow for the easy introduction of the wage peak system, performance-based pay system, and systems for firing workers with poor performance. The agreement also opens the way for the creation of more precarious jobs through the extension of the period during which employers can hire workers on short-term contracts and the expansion of temporary agency work. The tripartite representatives also agreed broadly to weakening of the Labour Standards Act including through lengthening and flexibilisation of working time and reduction of the wages included in the calculation of ordinary wages.
The tripartite agreement has, in this way, served to justify legal and regulatory reforms that are disadvantageous to workers. At the same time, the government has failed to put forth valid plans to achieve the goals it originally announced of increasing youth employment and promoting coexistence and balanced growth for small and large enterprises. The government has taken no responsibility for reforming the cheobols or alleviating labour flexibility, the real causes of labour market polarisation.
While the ruling party’s proposed legislation for modernisation of the labour market is based on the tripartite agreement, it also includes a great number of provisions not mentioned in the agreement, thus amounting to an extreme deterioration of the current labour law. These addition problems are as follows. First, the Ruling Party’s legislation clearly includes an interpretation of the law that goes against current legal precedents and weaken the Labour Standards Act by prohibiting payment of two bonuses when workers work overtime on days off. This will directly decrease workers’ compensation for overtime work and total income, while at the same time indirectly increasing the incentives to employers to employ workers overtime, thus resulting in increases in overall working time, already incredibly high in Korea. Second, the legislation would permit temporary agency work in so called root industries (enterprises performing basic manufacturing tasks including casting, molding, welding, surface treatment, plastic work and heat treatment). It would also limit the standards for determining the employer status of parent companies in subcontracting situations and distinguishing between agency and subcontracting work, which have been established through legal precedents. This will have the effect of opening up the avenue for large companies to employ workers through temp agencies where in the past these practices have been found to be illegal in courts of law. Third, in the case of the expansion of unemployment compensation, held out as a ‘carrot measure’, the legislation would actually reduce the lower limit of compensation, which applies to 67% of those eligible, and expend the period of enrollment from 180 to 270 days with the effect of worsening basic unemployment coverage for the most vulnerable workers – those in low-wage short-term jobs.
The KCTU’s Policy Alternatives
In response, the KCTU has criticised the fallacy of the government’s policies while proposing chaebol reform and a transition away from the government neoliberal labour flexibilisation policies as an alternative. In particular, the KCTU has put forth a proposal for measures that can really create of good jobs encapsulated in our 6 demands for chaebol responsibility, good jobs for youth and a decent life for workers and common people.
We see the main problems of the Korean labour market as the following: ➀ Growing precarious work and worsening of the quality of work; ➁ increasing low income work and income disparity; ➂ expanding labour market flexibility and the lengthening of working time; ④ repression of fundamental labour rights and an absence labour-management relations; ⑤ lack of a social safety net.
The cause of these problems is not excessive protection for regular workers or obstinate labour unions as the government and ruling party assert. Rather the cause is to be found in the government’s pursuit of neoliberal labour flexibilisation policies in the wake of the 1997-1998 economic and foreign exchange crisis and the chaebol-centred economic system. In other words, the introduction of the laws on redundancies, temporary agency work and flexible working time during this period have resulted in the generalisation of ‘growth without jobs’ and ‘growth without income’, while the policy of chaebol-centred growth has allowed chaebols to take hold of all the power and wealth for themselves while at the same time mass producing bad jobs. These are the main causes of the problems in the labour market.
Given this situation, the KCTU places primary responsibility for the expansion of bad jobs and the resulting labour market polarisation on chaebols and large corporations. Despite the fact that chaebols have grown rapidly as a result of the government’s reduction of corporate taxes, deregulation and other favours, they do not act in a socially responsible manner, which would require them to create good jobs and promote balanced growth. In particular, despite the fact that these companies have the ability to pay, they are using a labour force that is 40% irregular. They are thus the main culprits behind the expansion of bad job.
In response, the KCTU is has proposed ➀ creation of jobs in the public sector through legilsation of three acts on chaebol tax reform (repeal of tax cuts to chaebols and normalisation of corporate taxes, taxes on windfall profits and internal reserves, reclamation of illegal profits by chaebol families and increase of taxes on the rich); ➁ enforcement of three principles of chaebol responsibility for a transition to good jobs including eradication of misuse of precarious workers and regularisation of employment status for workers doing permanent continues jobs, chaebol participation in industrial collective bargaining, direct collective bargaining with subcontracted workers and application of one collective bargaining agreement throughout the same corporate group; and ➂ legislation of three acts on the chaebol responsibility for the harmonious development of small businesses and independent contractors including guarantee of group bargaining for suppliers, regulation of chaebol infringements on local business and improvement in the relationship between large and small enterprises.
In addition, the KCTU is proposing the creation of new jobs through a cap on real annual working time at 1800 hours. Despite the fact that Korea has enacted a five-day work week, Korean workers still suffer the longest working hours in the world, with average annual working time reaching 2,163 hours in 2013 by OECD standards. Shortening this excessively long working time is the most effective policy for creating employment, a fact with the government itself admits. To eradicate the practice of excessively long work hours it is necessary to normalise the calculation of ordinary wage in order to fix the unbalanced wage structure and ensure that workers receive fair bonuses for extra hours of work to correct the current situation in which overtime work is less costly than fixed working time. This is the way forward to change illegal and extralegal behaviour of employers who have, until this point, chosen to require existing workers to work long hours existing instead of making new hires. One can take note of a report which shows that simply forcing employers to adhere to the legal limit on real working hours of 52 hours a week would have the effect of producing 620 thousand new jobs, while reducing working hours to 48 a week create 1.05 million new jobs.
The KCTU is also calling for the regularisation and direct employment of precarious workers doing permanent continuous jobs, which was in fact an election promise made by Park Geun-hye herself. Currently, the government has stated it will regularise the employment of irregular workers’ in the public sector, but limiting the scop of this plan directly-employed irregular workers. The government has failed to put forth a realistic plan for inducing regularisation of the status of irregular workers in the private sector. In the public sector indirectly employed workers, including temp agency and contract workers should also be included in the scope of the government’s policy, while a policy for obligating private sector employers to regularly employ all workers doing permanent and continues tasks should be enacted. In addition, it should be obligatory that all work directly related to public safety be done by workers in direct and regular employment relationships. It is estimated that should all precarious jobs in the public sector by 2013 standards be regularised, this would create roughly 350 thousand good jobs. The majority of in-house subcontracted workers used by chaebol subsidiaries are in fact actually in illegal temp agency employment relationships. Should these jobs be regularised, it would create and estimated 640 thousand good jobs. Should such a program by widened to include all companies employing 300 or more workers, the result would be the regularisation of 920 thousand jobs.
In addition, the KCTU has proposed guarantee of a living wage by increasing of the minimum wage to KRW 1 thousand, full application of the Labour Standards Act to workers in enterprises with less than five employees and workers on extremely short contracts, guarantee of the fundamental labour rights protected in the Constitution to all workers and strengthening of the social safety net and public welfare system through measures such as the improvement of the unemployment compensation system, establishment of an unemployment allowance system, expansion of industrial accident insurance coverage and strengthening of national pension service coverage. We see these as important policy alternatives for creating good jobs.
The KCTU’s Struggle Plans
The government mistakenly thinks it can use labour reform to improve its stained image in the wake of a series of failures, which include ruin of the people’s economy, failure to respond to the Sewol and MERS crises, undemocratic actions by public agencies, several instances of corruption and abuse of authority and its plan for the development of a regressive government-administered history textbook. Government leaders have been blatant in making brash and arrogant statements, saying things like ‘It’s because unions wield iron pipes that we have not yet achieved a 30 thousand dollar average income,” and “We are prepared to lose 600 thousand labour votes.”
The KCTU is confident, however, that its labour reform policies will actually be a boomerang that returns to hit the government and ruling party in the eye. We have, therefore, prepared ourselves for an determined battle to achieve our six demands for chaebol responsibility, good jobs for youth and a decent life for workers and common people and to stop the government’s regressive labour reforms. To a president that says she has put her fate on the line to achieve these labour reforms, we say that the fate of the entire working class rests with stopping these policies and achieving our six demands. It is with this attitude that we have embarked on our struggle.
The KCTU staged a National Workers Rally and People’s Mass Mobilization on November 14. We took direct action against the labour market reform and trampling of common people’s livelihoods, as well as the establishment of a government issued history textbook and other threats to democracy, together with other social classes. November 14 with demonstrate common peoples’ rage aimed at the Park Geun-hye administration and the New Frontier Party.
We will build on the momentum from this people’s uprising to carry out a general strike to stop the government’s regressive labour polices in timing with the government’s political and legislative drive, which we predict will take place after mid-November. The KCTU already has the historical experience of having stopped the Kim Young-sam government’s regressive labour law revision in 1996-1997. Should the government seek to push through its proposed legislation and administrative directives, it will find itself in a state of political crisis just as did the Kim Young-sam administration. On this basis, we seek to throw out the administration and ruling party in the 2016 general elections and 2017 presidential election and advance our policy alternatives for the benefit of workers and common people. Going beyond stopping the government’s labour policies, we will seek to expand labour rights by achieving our policy alternatives through an offensive struggle. In that process we will seek exchange and solidarity with workers around the world who are fighting neoliberal labour policies and the economic crisis that has arisen from the crisis of capitalism.