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June 1999

Korea Labor & Society Institute

1. Unemployment Structure in Korea

Unemployment has struck Korean society more seriously than ever before. In 1998, a total of 5,607,000 persons were classified as unemployment, constituting 26.2% of the 'economically active population'. The total percentage of the 'economically active population' affected by unemployment represents 20.6%, including the 'discouraged workers' and 'involuntary part-time workers'.

In addition, the total number of 'the economically non-active population', the number of persons employed in unpaid family work and agriculture, forestry and fishery sectors also has increased. Thus, the quality of employment has greatly deteriorated.

Mass unemployment is a result of the rapid decrease in jobs, not only because the absolute number of employed persons has decreased but also because the number of involuntary unemployed workers has rapidly increased. Direct employment adjustment in the form of discontinued employment relations and the rapid decrease of labor demand destroyed many jobs, which caused the unemployment crisis.

The inflow into unemployment, especially the influx from employment into unemployment has been rapidly increasing. Therefore, it should be emphasized that the main reason for the increase in unemployment is a mass loss of jobs resulting from the decrease in jobs, not from the supply pressure of influx of the 'economically non-active population' into unemployment.

Considering the international comparison in 1998, our level of unemployment can be compared to countries with high unemployment and is higher than that of the US. So, we can say that the labor market in Korea has been rapidly transformed from the existing stable employment structure into the American model.

The duration of unemployment has been prolonged and the proportion of long unemployment has continuously increased. The longer the duration of unemployment is, the lower the possibility to overcome the long unemployment is.

Mass unemployment is still at an early stage. The proportion of long-term unemployment in Korea is not higher than in foreign countries. Long-term unemployed workers also do not seem to be concentrated on the periphery level of the labor force.

But, due to the fact that the unemployment rate is increasing, especially that of long-term unemployment, that the social safety net is poor and that the periphery level of the labor force should make another attempt to get a job, the possibility that the problem of long-term unemployment will become more serious still exists.

Unprecedented mass unemployment has significantly changed the structure of the labor market. The exposure of permanent unemployment, the extension of the duration of unemployment, the deterioration of the quality of employment and high levels of unemployment are becoming more characteristic of the labor market.

We are at a turning point where we should decide how to restructure the labor market. If flexibility of the labor market takes top priority and only an ex post facto support policy for unemployment is implemented, it will be difficult to overcome the current mass unemployment crisis. In addition, it is possible that social exclusion and instability will occur.

Due to the poor social safety net, the implementation of a labor-exclusive policy focused on flexibility of the labor market will cause long-term unemployment, increase inequality and lead to social unrest.

2. Alternative Policy of Trade Unions

It is important for the labor movement to set up and present and implement socio-economic policies to defend employment and life of all working people as well as trade unionists. Currently, capital is presenting the clear direction of its 'neo-liberal structural adjustment'. Unfortunately, it will be difficult for the labor movement to set up an alternative ideology against neo-liberalism in the near future.

Rather than do this, it is more urgent for the labor movement to set up a practical policy target based on common consent by the majority of trade unionists for the time being. The minimum policy target that labor movement can propel assumes both offensive and defensive targets. The 'democratic structural adjustment' and the 'Keynesian expansion policy' are the offensive targets, and job security and welfare policy for the people are the defensive targets.

(1) The Basic Position of Trade Unions

Trade Unions should transform the struggle opposing the lay-off system into a struggle demanding social regulation on employment adjustment. Trade unions should press employers to avoid lay-offs, and if possible, they should set up a policy to prevent arbitrary dismissals from employers by insisting on social regulation on the scale and procedure of lay-offs.

For this, it is essential that trade unions engage in a strategy to set up alternative policies on job security, training, working hours, unemployment, and that they defend the interest of working class by positive engagement in structural adjustment and negotiation with employers.

(2) Reasonable Improvement of Lay-off System

We should change the ambiguous articles related to lay-offs through revision of the Labor Standard Law or legislation of the dismissal restriction law, and prevent the abuse of lay-offs by employers. On this occasion, we should revise the articles concerned in the Labor Standard Law as follows:

• To define more restrictive requisites of lay-offs.

• To make the procedure of consultation with trade union or workers' representative clear.

• To prepare concrete criteria on efforts to avoid lay-offs.

• To make a reasonable selection of target for lay-offs

• To make more positive and concrete criteria on reinstatement of dismissed workers

(3) Improving the Direction of Institutions Concerned Under the Current Labor Standard Law

• The government should improve and make decrees and guidelines related to dismissal clear.

• The government should supervise and regulate illegal or unfair dismissals by some employers.

• The government should control and supervise employers to ensure that full consultations are taken with trade union regarding lay-off procedures.

(4) Response to Employment Adjustment at the Enterprise Level

• Trade unions should institutionalize job security at the enterprise or industry level through the establishment of an 'employment security committee' and the creation of a collective bargaining agreement on employment.

• Trade unions should demand that employers make an agreement on lay-off procedures and job security in collective bargaining agreements.

• Trade unions at the enterprise level should grasp the financial and managerial situation of the company and protect workers against sudden job insecurity.

• Trade unions should demand that all preparatory measures be taken to minimize the scale of lay-offs, if it is unavoidable.

• Trade unions should demand that employers engage in sincere consultations with them and those targeted for dismissals, when lay-offs occur.

• Trade unions should demand that employers select those targeted for dismissals in reasonable manner. In this case, age, tenure and family situation of workers should be applied to the selection process.

• Trade unions should demand that employers fully compensate those dismissed because lay-offs are not attributable to workers, but to employers.

• Trade unions should establish 'employment security centers' within companies to provide services for those dismissed in cooperation with employers.

• If possible, employees should have the opportunity to take over the bankrupted company. In this situation, employees should demand taxation, financing and legislation support from the government.

(5) Work Sharing of Employed Workers

The best strategy to secure jobs in periods of depression engage in a policy of sharing jobs through the reduction of working hours. In order to do this, we should focus on the following points:

• First of all, we should consider revising laws for the reduction of working hours.

• Three parties-the government, trade unions and employers- should focus on reduction of real working hours as well as that of legal working hours.

• Work-sharing to maintain and create jobs should be implemented by reducing working hours below legal working hours. In order to support this goal, the current system for maintaining and creating jobs should be accelerated.

• Three parties should expand the possibility of paid leave and increase the total number of leave days.

• Three parties should expand the paid/unpaid leave system and step up a support system for this.

(6) Unemployment Measures and Social Safety Net

Concerning measures against unemployment, trade unions should focus on the following points:

• In order to resolve current unemployment, three parties should transform neo-liberal restructuring adjustment and labor market policies based on flexibility into social-inclusive restructuring adjustment and job-creating macro-economic policy.

• Three parties should set up a social safety net through expanding the unemployment fund and introducing unemployment aid to businesses.

• Three parties should positively develop training systems and employment agencies.

• The fundamental resolution of massive unemployment in structuring adjustment is creating jobs through recovering the economy and making industries and enterprises sound. Considering this, trade unions should demand that the government set up and implement macro-economic policies.

• Trade unions should demand that the government and employers allow the participation of trade unions and workers' representatives in procedures for creating unemployment measures.

(7) Implementation of Direct Unemployment Measures by Trade Unions

Trade unions are asked to set up and implement an unemployment measure for itself. For this, they should take the following steps:

• Trade unions should actively organize the unemployed.

• Trade unions should deliver services and welfare benefits to the unemployed.

• The trade union movement should establish a 'Regional Center for the unemployed'.

• The trade union movement should represent the interests of the unemployed by pressuring the government and making agreements with employers.

The problems of enterprise union system are coming out with the appearance of so-called 'the IMF management system'. The trade union movement should recognize the needs and urgency of organizational transformation into an industry union system and take efforts to build an industry union system.

Now is the time to consider seriously the unification of Korean labor movement at a central level. The division of the labor movement means a tremendous disadvantage under the crisis situation.

The trade union movement should fundamentally re-examine the current bargaining system. In order to prevent job insecurity and prepare measures against mass unemployment, it is absolutely required for Korean society to legalize and institutionalize a newly improved bargaining system. Therefore, three parties including trade unions should seriously consider how to make an institutional framework for central bargaining with the government and employers.

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