Labor, Management, and Government Reach Agreement; Outcome is Unclear

Representatives of labor and management came to an agreement in which the main objective is to refrain from excessive wage hikes and massive layoffs under restructuring programs over the next two years.

The Korea Tripartite Commission (KTC), consisting of labor, management, and government representatives, revealed on February 8 that six members of the “Committee for the Social Pact to Create Jobs” including Kim Song-tae, Federation of Korea Trade Unions secretary general; Cho Nam-hong, Korea Employers Federation vice chairman; Park Kil-sang, vice minister of Labor; and Kim Won-bae, the commission’s standing committee member, concluded the drafting of a proposal for a “social pact to create jobs” through overnight negotiations beginning Saturday.

This proposal is the first one that was agreed upon by the KTC since the social pact to “overcome economic crisis,” which legalized layoffs and a teachers’ labor union, concluded after the currency crisis in February 1998.

In order to create jobs and improve wages for irregular workers and employees working in small or medium-sized companies, labor unions agreed under this proposal to minimize pay increases for large companies that offer relatively high wages.

Companies will refrain from layoffs and consult with labor unions to minimize layoffs when job cuts are avoidable, and will make efforts to re-hire laid-off workers when they employ workers again.

The government will ease corporate regulations and expand tax cuts and financial assistance. The social pact will conclude on February 10 in a full session of KTC, through discussions of labor and management.

Meanwhile, the government plans to develop a set of policies on detailed practices based on the social pact within this month. In addition it plans to compose a “Joint Committee for Job Creation” in which labor, management, and government representatives will participate in the creation of the social pact.

Some difficulties may arise in the implementation of the agreement, however, as Lee Soo-bong of the Korean Confederation of Trade Union is refusing to participate in the KTC, stating that “the agreement may be used as a tool for wage cuts and lacks a concrete proposal for actual practice.”

Ho-Gab Lee gdt@donga.com