Korea Employers Federation Advises Large Companies to Freeze Wages This Year

The business sector proposed a 3.9 percent wage increase for small- and medium-sized businesses while advising large companies to freeze wages.

However, the labor sector is harshly criticizing this proposal, suggesting a bumpy road ahead for this year’s wage negotiations.

The Korea Employers Federation (KEF) released the “2005 Wage Guidelines for Businesses” on March 14, which stated, “Sluggish domestic consumption, weak investment, and the aging society have slowed growth. In addition, youth unemployment has added to the employment uncertainties. Considering the economic conditions, we advise a 3.9 percent increase in the wages of small- and medium-sized companies’ employees and suggest to large companies with 1,000 or more employees to freeze wages.”

The KEF’s proposals for this year does not differ greatly from the proposal for last year when it suggested a 3.8 percent wage increase for small- and medium-sized companies and a wage freeze for large companies.

The only marked difference is that the KEF defined companies with employees of 1,000 or more as large instead of last year’s standard of 300 or more.

However, the KEF’s proposals are largely different from what the labor sector has demanded this year.

The Federation of Korean Trade Unions (FKTU) demanded in January a wage increase of 9.4 percent and 19.9 percent for regular and non-regular workers, respectively. In February, the Korean Confederation of Trade Unions (KCTU) demanded a wage increase of an average of 9.3 percent (a minimum 7.3 percent and a maximum 11.3 percent) for regular workers and 15.6 percent increase for non-regular workers.

The labor sector’s demand for separate wage increase for regular and non-regular workers seems to be a move to highlight the issue of non-regular workers this year.

The FKTU said in a statement of the KEF’s proposals, “Today, the average wage of chief executives of large companies surpasses one billion won. At a time like this, the KEF’s wage guidelines are nothing less than destructive to labor-management relations. We are determined to achieve the wage goals of 9.4 percent wage increase for regular workers and 19.9 percent wage increase for non-regular workers as well as a minimum wage of 811,640 won (currently 641,840 won).”

The KCTU also issued a comment saying, “The KEF’s guidelines are intended at containing the laborers’ wage, and this calls for an all-out struggle in the first half of this year.”

Sang-Soo Kim ssoo@donga.com