Ministries Reviewing Adoption of “Wage Solidarity System”

President Roh Moo-hyun ordered relevant ministries to review the adoption of a “wage solidarity system” aimed at closing the income gap between employees of large companies and small and medium sized companies.

On August 14, sources in the presidential office said during a presidential meeting to discuss ways for win-win strategies between large and mid-and-small sized companies held on July 5, the president was briefed on cases of joint work training among some large- and small-sized companies. Responding to the report, the president told officials to examine ways for employees from different companies to cooperate, including a wage solidarity system.

Under a wage solidarity system, labor and management decide minimum wage increase rates in each sector through collective bargaining. The classic example is the agreement made in 1956 in Sweden by labor, management and the government based on concession of large-sized companies’ workers.

If the system is adopted, the minimum wage increase rates will be used as a guideline, preventing a wide income gap among employees of large companies and mid- and small-sized firms, and contract-based workers in the same sector.

On the flip side, some point out that the system can put a heavier burden on small companies because the minimum rates allow firms to increase wages beyond the lowest rates but not below them.

On this concern, a senior official in the presidential office said, “President Roh’s remark is to put emphasis on the spirit of the wage solidarity system, not to implement it right now.” He went on to say that “the government can only give incentives to large-sized companies or their labor unions to encourage them to follow the system. It cannot force them to adopt it. Under the current environment of company-based negotiations, it will not be easy to put the system in place since the system requires the strong industry-based negotiations.”

Jung-Hun Kim jnghn@donga.com