Labor Reform: Easier Layoffs, Lower Wages, and More Irregular Workers

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An employer rides on top of a regular worker who issandwiched against an irregular (contract) worker below him. (Source: Power of Truth)

55 years ago, on November 13, Jeon Tae-Il burned himself in protest shouting, “Follow the Labor Standard Act,” and, “We are not machines.” He sacrificed himself to bring attention to the wretched working condition of workers who were treated like machines. Over time, workers’ fierce and constant struggles improved conditions. However, these days layoffs are increasing, irregular and dispatched workers[ref]Dispatch workers are those employed through third party employment service companies.[/ref] are growing, and every day we hear about youth unemployment on the news. Now, the government and ruling party are proposing a package of labor market amendments and guidelines to improve national competitiveness, which is just code for helping employers and capitalists better exploit workers.

In September 2014, the government established the “Special Commission for Improving Labor Market Structure” and  actively pursued labor market reforms. Its goal was to “address several labor issues with the aim  of improving labor market structure and prepare an efficient and equal labor market system.”[ref]https://www.esdc.go.kr/bbs/viewbody.asp?code=special31&id=15&number=15[/ref] After a three month discussion, an agreement was announced with labor represented by the Federation of Korean Trade Unions (FKTU) and the Korean Confederation of Trade Unions (KCTU) boycotting. The agreement discussed the “dual structure of Korea’s labor market[ref]A dual labor market refers to the gap between full-time regular employees with stable jobs and irregular workers who have far less job security and are paid less. The system has been cited for fueling unemployment among young people, who are hard pressed to find good paying jobs. http://english.yonhapnews.co.kr/business/2015/10/21/0502000000AEN20151021003700320.html[/ref], wages, working hours, retirement age, and repairing the social safety network.” The discussion continued on April 2015, but this time the FKTU also boycotted the discussions stating that the government’s proposal was unacceptable. After four months, the FKTU announced it would return to the table. The KCTU opposed the talks, threatening a general strike if discussions continued. A month later, the Economic and Social Development Commission declared that they reached “agreement on labor reform”. This resulted in a proposal by the ruling Saenuri Party to amend five labor laws, and government administrative guidelines that would allow employers to dismiss underperforming workers and change employment rules without union or employee approval. In response, the KCTU declared it would mobilize 100,000 people on November 14 for its People Rise Up Rally.

Here is why the ruling Saenuri Party’s amendments to labor laws and the government new labor guidelines hurt workers:

The Saenuri Party Labor Law Amendments

  1. Not only would the unemployment payment amount decrease for the poorest, but it would become more difficult for everyone to receive unemployment benefits.[ref]“Unemployment benefits” refers to a system that provides payments to meet the basic needs and security of a person while he/she looks for work. To qualify, a person must be unable to secure employment despite his/her desire and ability to work. http://oneclick.law.go.kr/CSP/common/CnpClsMain.laf?popMenu=ov&csmSeq=582&ccfNo=7&cciNo=1&cnpClsNo=1[/ref] The Saenuri Party claims that amendment of the labor law would increase the basic unemployment payment from 50% of a worker’s average wages to 60% and increase the benefit period from 90-240 days to 120-270 days. However, for those receiving the minimum unemployment payments, their amount would be lowered from 90% to 80% of the minimum wage. In addition, the period a worker needs to contribute to unemployment insurance to qualify for benefits would increase from 180 to 270 days.

  2. Employers would be able to keep employees as irregular workers for another two years instead of hiring them as regular workers. In the current contract system, a worker can be hired for a two-year contract. After that period ends, if the employer wants to retain that worker, they must hire him/her as a regular worker. However, the amendment would make it possible for employees over 35 to apply for a one-time two-year extension. This would not only allow employers to retain employees in precarious low paid positions, it would also disqualify employees that refuse the extension from unemployment benefits. Since the employee would be deemed to have left the job of their own will, they would not qualify for unemployment insurance. This denial of unemployment benefits gives employers greater leverage to pressure employees to remain as precarious workers with low wages and little benefits. 

  3. The amendments would make it possible for an employee to work 60 hours per  week. Currently, the law limits a normal work week to 52 hours (40 statutory working hours + 12 overtime hours). While forcing someone to work beyond the 52 is technically illegal, it has become a de facto practice as long as employees provide  the higher overtime rate of 2.25 times the regular pay. By allowing employers to extend work hours by another 8 (totaling 60 hours) during the weekends and holidays, employers would be able to pay a much lower compensation of 1.5 times the regular pay.  

  4. The number of sectors that can use dispatch workers would be expanded.  Dispatch workers are part of the same workplace and may even do the same work as regularly employed workers; however, since they are not directly hired by the company, the host company  can avoid paying annual wage increases,  pension, and bonuses, while also easily dismissing workers (during economic downturn). Fierce opposition to the dispatch worker law limited the number of occupations where workers could be dispatched to 32. The amendment would expand the number of occupations open to dispatch workers.  Furthermore, employers in most occupations except a few (e.g. medical field, drivers) would be able to hire employees over 55 as dispatch workers.  

Government Labor Guidelines

  1. Employers would be able to easily “fire underperforming workers.” In the existing Labor Standards Law, an employee cannot simply be fired for underperforming. According to the government guidelines, employers using the pretext of “low performance” will be able to fire employees that form unions, women workers that require maternity leave, and injured workers. 

  2. Employers would be given the power to unilaterally change employment regulations. Currently, employers with over 10 employees are mandated to provide  workers their employment regulations which set working conditions. If employers want to change these, they must  get approval from a majority of employees or union members. 

  3. A peak salary system would be introduced which would lower the salary of workers aged 58-60 to create jobs for young people. However, no mechanisms forcing companies to create jobs for young people with the money saved are being introduced. This is evidenced by the peak salary system at Hyundai Heavy Industries where regular worker positions for young people decreased and dispatch workers increased.[ref]http://newstapa.org/29459[/ref]

Workers are the Hope

To hear workers’ opinions, I visited Choi Dong Joon, head of the mechanics branch of the Seoul Metropolitan Subway. According to Choi, amidst constantly deteriorating working conditions, workers know that this labor law revision only helps employers, capitalists, and the conglomerates. After 2000, labor policies have constantly been deteriorating, starting with the Lee administration and continuing under Park. In reference to the peak-salary system, Choi comments, “In my 25 years as a union member, 20 of them in the leadership, there’s been wage freezes, but I’ve never heard of wage cuts. That was the same even during the IMF crises. The country is not even facing difficulties, and we are talking about wage cuts pretending that they will resolve the issue of youth unemployment. This is not a normal government.”

Because the government announcement for restructuring the labor market is filled with jargon, it is difficult for workers and the public to understand the impact it will have on them. So, since the beginning of the year, unions have been  educating workers. Every week Choi has been visiting workplaces educating union members about the proposed labor revisions. While the workshops explain the contents of the labor market reform, they also explore the fundamental reasons why the government is pushing for such reforms. “Korean economists are saying that Korea has fallen into a long-term economic depression. Despite their reserves of over 600 trillion won,[ref]Profit reserves refers to the profits left after taxes and after dividends are paid. http://news.khan.co.kr/kh_news/khan_art_view.html?artid=201407312107555&code=990100[/ref] the conglomerates are preparing for falling profits by pressuring for changes that will lower labor costs. Performance based bonuses and dismissal for low performance allow companies to improve their profit structure by turning regular workers from the older generation into irregular workers. Basically, they don’t want to incur any losses, even when the economy is doing poorly and the government is taking their side. Given this pro-capital government that only sacrifices workers, it’s clear that workers must wage class struggle.”

Workers are not simply educating other workers, they are also organizing. Starting with the April 24 general strike to block the government and ruling party’s labor law revision, there have been various protests, nationwide occupations in major cities, and a referendum vote on the labor law revision. In addition, in order to raise awareness about the labor law revision among the public, workers have been picketing and passing out leaflets during rush hour as well as hanging banners. Every November, a worker’s rally is held to remember the spirit of Jeon Tae Il. This year’s - “The  People Rise Up” - will take place on November 14. With the slogan “let’s flip the world around,” the KCTU will unite the voices against a government that is threatening the livelihoods of farmers, street vendors, and evictees. In preparation, Choi is organizing workers about the importance of participating in this rally. He emphasized the need for workers to participate and protect their various rights,

“Participation is important. I tell them that if they don’t participate they won’t have any rights. Just because governments are elected for five years doesn’t mean we can just give them free rein. If we don’t get involved, the powerful won’t have anything to fear.”

If the government and ruling party manage to restructure the labor market, the number of irregular workers will increase; employers will be able to easily fire workers; and even if a worker does the same work, he/she will still get paid less. Not just workers, but also farmers, the poor, and civil society must unite to stop this from happening. We must create true improvements for workers. Jeon Tae Il’s shouts 50 years ago must now become a chorus.

written by Hwang Jeongeun (General Secretary, ISC)