[INSIGHT]What the Whales Leave in Their Wake

In Korean, there is a saying: "When whales fight, the shrimps' backs are broken," meaning that often in a fight between two large parties is a smaller third party who bears the brunt of the confrontation.

Ulsan was once a base for whale hunting. These days, it is an industrial center packed with the factories of conglomerates. But recently, while in Ulsan, I heard a story which reminded me of our Korean saying about the whales.

My interlocutor is the owner and manager of a small company in Ulsan. His small business is dependent on a few large companies in Ulsan for all the sales of its products. Among them is a large conglomerate.

The conglomerate's labor union went on strike demanding higher wages. It was a fight between a whale company and a whale labor union. The labor union achieved what it was asking for and ended its strike. The following day, the person in charge of purchasing at the conglomerate came to see my friend.

He said that in order to compensate for the raise in wages going to the conglomerate's workers, he was obliged to cut the price paid for the goods he bought from my friend. He asked my friend, and all the other small firms he does business with, to lower the prices of their products by 5 percent.

My friend had no choice but to accede to this demand. But he has barely been managing to make a profit since the economic slowdown. If he cuts the prices as requested, his business will inevitably go into the red.

He has three choices before him, but none are happy.

The first choice would be to operate his company at a loss － the quick route to a bankruptcy. The second choice would be to lower the wages of all his employees commensurate with the lower prices he will be getting for his goods. The third choice would be to end his dealings with the conglomerate and lay off employees to match the loss in his sales.

This is where we come back to the folk saying. In a situation like this, in which small companies' laborers must suffer wage cuts and layoffs because a large company's labor union has succeeded in getting its wages hiked, the shrimps' backs are broken because of a fight between whales.

The pride my friend once felt in having started a prospering business from scratch dissipated long ago. He has organized a small fellowship group with other presidents of small companies in Ulsan. But many of the members are now in prison because they went bankrupt. They tried to stave off their cash flow deficit by taking out loans, which they then defaulted on.

My friend has been visiting them in prison as president of the fellowship group and seems to have made his decision. "Even if I have to close down my company, I will never take out loans to make up for the deficit," he said.

Laborers at the conglomerate make 50 percent more than those with similar skills at my friend's small company. The laborers in one of Ulsan's other big companies make 100 percent more. If such large companies raise their workers' wages by 5 percent and put the burden of the difference on small companies, then small companies that want to avoid going into deficits have no other choice but to cut their wages by twice as much or to lay off 10 percent of their employees.

My friend is now deliberating over the two choices.

Large companies' monopolistic position over small firms has, in the end, resulted in the labor unions of large companies exploiting the laborers in the small companies. This structure has led to the labor unions of large companies amassing more wealth at the expense of greater poverty incurred by the workers at small companies. If one side raises its wages, then the other side must reduce staff or incur a cut in wages.

According to my friend, the labor union at the conglomerate used force to prevent non-unionized members from going to work; this in a society where only the government has the power to use physical force.

The Federation of Korean Trade Unions and the Korean Federation of Trade Unions seem to decide labor strikes nationwide and seem to have the exclusive right to interfere in the provision of labor, which is the most important element of production. But after that interference, they are not accountable for that decision. They are exempt from the "no work, no pay" principle.

Workers at small companies are the shrimp with broken backs; they are the victims of the three special powers that labor unions at large firms exercise: the use of force, the exercise of monopoly and decision-making without risk.

There is another shrimp: Korea's entire economy. Large companies' labor actions are freezing new investment, making Korea less competitive in exports and driving out foreign technology and capital.

If the government tries to stimulate demand by expanding expenditures without forcing labor unions to give up their inordinate power, the action will only inflame inflation and exacerbate the current situation.

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The writer is the editor of the monthly magazine Emerge New Millennieum.

by Kang Wee-seuk