I. Industrial Relations in 2016
1. Conflicts over labor market reform
During 2016, conflicts over labor market reform accelerated. The government released three guidelines towards implementation of labor market reform at the workplace level: guidelines on fair human resource management & rules of employment (22 January), guidelines on performance-based wage systems (28 January), and guidelines on wage and collective bargaining (23 March). However, labor market reform did not progress well as the FKTU declared a breakdown of the tripartite agreement on 19 January and the 20th general elections were held on 13 April.
Tensions in labor relations have increased as unions fiercely oppose the government’s labor market reforms.
[Table 1] 2016 Strikes against Labor Market Reforms
|
Federation of Korean Trade Unions (FKTU) |
· Sit-in tent protest against labor market reform bills in front of the National Assembly (26 September ~14 October) · Policy consultations with liberal parties and using parliamentary inspections to block labor market reform |
|
Korean Confederation of Trade Unions (KCTU) |
· All-out strikes to oppose labor market reform and provoke anti-business sentiment (29 June ~ 23 July, 30 November) · ‘Emergency People’s Action for the Resignation of the Park Geun-hye Regime’ organized and demands issued to abolish government policy |
|
Joint Committee for the Public Sector (FKTU & KCTU) |
· Sit-in tent protest against expansion of performance-based pay in front of the National Assembly (11 May~30 June) · Relay strikes against expansion of performance-based pay (23~29 September) · Legal action and filing for injunction against the company board’s decision to expand performance-based pay · Action by the Korean Railway Workers’ Union, including a 74-day strike (the union’s longest) and an all-out strike against expansion of performance-based pay (23 September~9 December) |
2. Worsening relations between labor and management at the workplace level
Performance-based pay, wage increases, business restructuring and other current labor issues continue to aggravate industrial relations at the workplace level. This meant that collective wage bargaining and labor disputes were prolonged in 2016.
[Table 2] Wage Negotiation Completion & Collectively Agreed Wage Increase
|
October 2016 |
Same period a year ago |
|
|
Wage negotiations completed |
55.7% | 63.9% |
| Collectively agreed wage increase | 3.4% |
4.0% |
[Table 3] Number of Labor Disputes & Lost Working Days
| 1 January ~
23 November, 2016 |
Same period in 2015 | |
|
Labor disputes |
107 |
100 |
| Lost working days | Approx. 1,820,000 |
Approx. 436,000 |
The performance-based pay was an emerging issue in the course of collective wage bargaining. Industry-level bargaining in the finance sector was suspended due to the different views of performance-based pay, which was also the main issue in wage negotiations in the public sector. Legal disputes have also continued over the company board’s decision to adopt performance-based wage systems.
In the auto industry, wage negotiations also did not progress smoothly as unions went on strikes demanding excessive wage increases. Of particular note is that the number of working days lost in the three major automakers jumped 100%p year-on-year. The three major shipbuilders also had difficulties with wage negotiations due to excessive union demands and opposition to restructuring plans.
II. Outlook for 2017
1. Economic outlook for 2017
The economic outlook for 2017 is gloomy amid growing internal and external uncertainties. Regarding the domestic economic situation, Korea is losing momentum as domestic consumption has stagnated in a prolonged economic recession and the employment market shrank due to restructuring programs in the shipbuilding, shipping, and steel industries. The external situation is becoming volatile as exports weaken due to declining world trade and slow recovery of trade volumes under a growing trend towards protectionism in advanced countries. In addition, a number of external uncertainties exist in developing nations, such as financial unrest caused by the US interest rate hike, a downturn in major economies and Brexit.
[Table 4] Outlook for Economic Growth in 2017
| Ministry of Strategy & Finance | Bank of Korea | National Assembly
Budget Office |
IMF | KDI |
| 3.0% | 2.8% | 2.7% | 3.0% | 2.4% |
2. Government drives to create jobs and protect non-regular workers
With the expected difficulty in pushing forward with labor market reforms due to strong opposition from labor, opposition parties a majority in the 20th National Assembly and chaos in state affairs, the government is planning to prioritize non-controversial issues such as job creation and protection of non-regular workers. The government will also continue its efforts to implement labor market reforms at the workplace level through expansion of performance-based pay systems, wage system reforms, improvement of illegal and unreasonable collective bargaining agreements and strict labor inspections.
3. Labor focusing on political activities
The Federation of Korean Trade Unions (FKTU) will seek to resolve current labor issues through the presidential election in 2017. The FKTU is also planning to hold its presidential elections on 24 January 2017. Mr. Dong-man Kim (incumbent FKTU president), Mr. Moon-ho Kim (president of the Korean Financial Industry Union, or the KFIU), Mr. In-sang Lee (president of the Federation of Korean Public Trade Unions), and Mr. Joo-young Kim (president of the Federation of Korean Public Industry Trade Unions) are the likely candidates for the FKTU election.
Under a three-year term, the new leadership of the FKTU is likely to continue the umbrella union’s stands against the government. It is also very possible that the FKTU will seek political solidarity with Korean presidential candidates as a way to resolve issues such as unwanted labor market reforms. Nonetheless, it is unclear whether the Federation will ultimately return to the Economic Social Development Commission (ESDC).
Taking advantage of the current political chaos, the Korean Confederation of Trade Unions (KCTU) is planning action aimed at abolishing policies considered to be anti-labor, forcing the prime minister and corrupt ministers to resign, and having heads of prominent conglomerates arrested. The Confederation will hold a general strike in the first half of 2017, and its regular convention in February to define its direction for political activities during the Korean presidential election, and join with progressive civil society organizations in taking action.
Major affiliates of the KCTU, such as the Korean Metal Workers’ Union (KMWU) and the Korean Public & Social Services & Transportation Workers’ Union (KPTU), will take up action against various conglomerates in line with wage negotiations and collective bargaining in 2017.
[Table 5] KMWU Action Plans for 2017
|
▲ Action leading up to presidential election (corporate governance reform, ban on layoffs, etc.) ▲ Action in support of wage negotiations and collective bargaining in 2017 (in connection with corporate governance reform and action during period leading up to presidential election) ▲ Enhance industry-level bargaining (Joint bargaining for affiliates of Hyundai Motor or Kia Motors) ▲ Action towards corporate governance reform (against Samsung, Hyundai Heavy Industries, Doosan etc.) |
4. Increasing political intervention and legal disputes in industrial relations
Political intervention in workplace industrial relations and legal disputes regarding current labor issues will increase in 2017. Concerns exist that labor will seek to open workplace issues up to the public, and politicians will increasingly intervene in these issues towards gaining support for their party’s candidate leading up to the presidential election. Political intervention is particularly expected in issues related to the public and financial sectors (performance-based wage systems), shipbuilding and marine transport sectors (layoffs), and conglomerate subcontractors (in the telecommunications, retail, electronics, and chemical industries).
Passing bills on labor market reform such as reducing working hours and defining the scope of ordinary wage will be delayed. Adoption of performance-based wage systems by decisions of boards of directors will also lead to legal disputes. As of 16 December 2016, 6 lawsuits related to overlapping wages for overtime and holiday work are pending at the Supreme Court. In the midst of this, courts are inconsistent in their decisions in cases involving ordinary wage, such as the application of the good faith principle and counting ‘cashless welfare’ and other forms of credit as ordinary wage, etc. The Joint Public Sector Committee under the two umbrella unions has filed nullity suits against and requested injunctions to suspend board decisions at 52 public institutions.
Regarding discussions on constitutional revisions, the possibility exists for a comprehensive amendment on governance structure, universal human rights and etc. Considering the possibilities of early presidential elections, it is difficult to ignore the amendment possibly including decentralization of presidential authority, and items related to basic rights. The 9th amendment of the Constitution in 1987 (the current Constitution) initially started with adoption of direct voting in choosing the president but ended up being an extensive amendment that included the 3 labor rights to independent association, collective bargaining and collective action, anti-discrimination, and democratization of the economy, etc.
5. Prolonged wage negotiations & collective bargaining in workplaces, with emphasis on wage and employment agendas
Wage negotiations and collective bargaining in 2017 will take longer than in other years. Factors include uncertainties connected to a potentially early presidential election, labor expectations for change in government labor policy, and other labor issues.
[Figure 1] Progress (Rate of Settlement) in Wage Decisions in Years Leading up to Presidential Elections (1998~2015)
Wages and employment will be the major agenda items considering the possibility of layoffs and the fact that many Korean companies negotiate wages in odd-numbered years.
6. Need for improvements to labor laws in response to the 4th Industrial Revolution
Labor laws enacted in past eras need revision in response to the realities of the 4th Industrial Revolution*.
* 4th Industrial Revolution: The current trend of convergence between existing industries and information technology, accelerated by the 3rd Industrial Revolution which spread the use of computers and the Internet. (the Internet → massive information storage → Big Data Analytics → new business)
Current labor laws were uniformly and collectively arranged mostly for the manufacturing sector of the past. Flexible amendment is essential to responding effectively to industrial changes and different forms of employment.
[Table 6] Recommended Direction for Amendment of Korean Labor Laws
|
▲ Uniform working conditions (collective agreements, etc.) → Each worker decides his/her own working conditions ▲ Dichotomy of non-regular / regular employment → Flexible forms of employment ▲ Relax excessive protection of regular workers → More conducive environment for job creation ▲ Abolish 2-year non-regular worker contract term limits, unwanted by workers → Contract terms should be arranged autonomously between employer and worker ▲ Dispatch employment can occur only for 32 jobs → Enhance the number of jobs in consideration of company demands |