[Editorial] Revamp of Wage System Needed

Following public companies, state-run and commercial banks and Korea’s top 30 corporations have joined the job-sharing initiative by announcing yesterday a cut in starting salaries of up to 28 percent. The nation’s largest conglomerate Samsung Group will reduce the starting salaries of college graduates 10 to 15 percent and Woori Bank and Industrial Bank of Korea will cut 20 percent. The government has advised 116 public companies that pay newly hired college graduates more than 20 million won (13,200 U.S. dollars) to gradually cut wages.

According to the Federation of Korean Industries, the average first-year monthly salary of college graduates at domestic companies was 1.98 million won (1,310 dollars), higher than those of Japan (1.62 million won or 1,070 dollars) and Taiwan (830,000 won or 548 dollars). Employees in the financial sector receive salaries 50 percent higher than those in Japan, yet their productivity is lower than that of the Japanese. Operational profit per employee in 40 Korean securities companies is one tenth that of foreign brokerages. Excessive entry-level salaries that fail to match productivity and per capita income will undermine corporate competitiveness and raise youth unemployment by increasing the expectations of jobseekers.

That said, forcing new hires to shoulder all the pain of an unstable job market is unfair. According to the Strategy and Finance Ministry, the average annual salary of 302 state-run organizations last year was 53.4 million won (35,000 dollars), 66 percent higher than that of ordinary workers (32.2 million won or 21,300 dollars). Employees at Hyundai Motor receive the highest annual salaries in the country though their per capita productivity is less than half that of Toyota Motors of Japan. Despite this, the Hyundai union has rejected an emergency management plan aimed at riding out the economic crisis.

For their part, large corporations must revamp their inflated wage systems. If they seek to make compromises over cutting starting salaries for fear of opposition from labor though fully aware of the urgent need for corporate restructuring, this will hamper efforts to overcome the economic crisis. KB Financial Group announced a plan to hire employees with a five-percent cut in salary for employees at vice branch manager level or higher. This measure needs no agreement from labor. For employee wages, the federation said yesterday it will make “adjustments.” In a time of crisis when the survival of corporations is at stake, the first thing to avoid is group egoism focused on their vested interests.

The U.S. Big Three automakers of General Motors, Chrysler and Ford have agreed to cut wages to the levels of workers at foreign automakers with no unions. Along with a payroll reduction plan, Toyota is considering cutting wages. The Federation of Korean Trade Unions and the Korean Confederation of Trade Unions have immediately rejected the plan to cut salaries of new recruits with college degrees. The two umbrella unions, however, must join the job sharing drive before massive layoffs come.