New labor council faces test of social compromise

Amid a deepening Middle East crisis that has driven the won-dollar exchange rate past 1,500, the first-term Economic, Social and Labor Council under President Lee Jae-myung was launched on March 19. The body faces an immediate test: forging social consensus to secure new engines of growth and stabilize employment in a period of heightened uncertainty. As its first agenda, the council chose to tackle labor challenges tied to demographic shifts, including low birth rates and rapid aging, and agreed to activate seven committees.

The twin forces of artificial intelligence and demographic change are not temporary disruptions. South Korea must address a shrinking workforce caused by population decline and aging, rising youth unemployment linked to the spread of AI, and the entrenched dual structure of the labor market between large corporations and smaller firms. A seniority-based wage system and a rigid labor market, where both hiring and layoffs remain difficult, leave companies and workers poorly positioned to adjust to rapid technological and market changes.

Meeting the demands of the AI era and expanding hiring for younger workers will require a new grand bargain among labor, management and government. A possible framework is the Nordic-style “flexicurity” model, in which labor accepts greater flexibility while businesses help shoulder the costs of social safety nets, including retraining and job placement, to strengthen employment security.

For such a shift to take hold, the council must reclaim its role as a forum for resolving social conflict through structured dialogue. In the past, tripartite bodies have often stalled because the parties failed to find a workable balance of interests, allowing discussions to tilt toward one side. The Korean Confederation of Trade Unions has not returned since leaving the council’s predecessor in 1999 and has remained absent for 27 years. At the latest meeting, the Federation of Korean Trade Unions attended, but the KCTU did not.

The meeting also marked the first since the implementation of the so-called Yellow Envelope Law, revisions to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act that could reshape labor relations. After mobilizing support in the National Assembly and on the streets to push the law through, the KCTU stayed away from the council, where long-term labor policy and shared responsibilities are discussed. While accusing companies and public institutions of avoiding negotiations with subcontracted unions and calling for direct talks with top executives and even the president, the KCTU itself declined to take part in the tripartite forum.

South Korea now faces mounting pressures at home and abroad, from the Middle East crisis to a weakening potential growth rate. In times of strain, social dialogue becomes all the more essential. Labor, management and government must come together to seek a path toward a broad social compromise. The KCTU’s place is not in the streets, but at the tripartite negotiating table.