Follow the Supreme Court’s leadDuring her state visit to the United States, President Park Geun-hye in a sideline meeting with Daniel Akerson, chairman of General Motors, promised to look into the dispute over how to define wages. If fixed bonuses are included in the statutory term of standard wages according to the rationale of the Supreme Court and labor sector, the corporate sector would have to deal with billions of won in extra employment costs and face lawsuits from workers demanding unpaid labor dues. The government is proposing tripartite dialogue with the labor and management to solve the dispute.
Ordinary wage is periodical and uniform payment for labor within working hours agreed on between the employee and employer. It becomes the salary base to calculate other statutory benefits, such as compensation for overtime work and work during days off. The level and scope of ordinary wages would differ according to the interests of labor and management and could affect working conditions, technology and innovation, and overall social and cultural lives. Labor and management have long disputed over the legal term of wages. The judiciary has been widening legal interpretation of ordinary wages since 1996. But the legislature has not attempted legal revision. The administrative branch revised the related act four times over the last 25 years, but refused to incorporate the consistent Supreme Court advice on extending the scope of ordinary wages to protect the interests of employers insisting on a no-work-no-pay principle to rein in strikes. Confusion and conflict in the industrial and labor field was aggravated due to the administrative and legislative neglect.
The solution is simple. Our society should follow through on the ruling by the Supreme Court on ordinary wage term. Wages should be paid for all labor. Fixed bonuses are rewards for labor during working hours and therefore should be regarded as part of ordinary wages.
In the long run, the impact would be helpful, not harmful, to society. Working hours could be reduced, helping the nation shake off the world’s top ranking as the longest-working population. Domestic demand could increase and create new jobs. Extra time from reduced working hours could stimulate venture and talent in the creative economy. If ordinary wages are extended, the current economic slump could be solved through increased domestic demand. Higher wages would lead to growth in consumer spending.
The International Labor Organization and other academia propose European countries struggling with recession and depression from fiscal austerity and deficits promote economic growth with wages instead of profitability. They advise governments and the corporate sector to pursue growth through employment increases for breakthrough. A wage-based growth model leads to growth in income and spending that would boost the consumer market and ease income disparities. Productivity would increase and accelerate technology advances, eventually helping to boost national competitiveness and growth. The European Union is also advising its member nations to shift to a wage-led growth model in order to stimulate demand and end the recessive cycle. It proposes policies to promote balanced share of incomes through wage increases, a rise in minimum salary base, reform in labor structure and reduction in working hours to offer more job opportunities to others.
We too must change our paradigm on the growth model. The trickle-down effect from a large manufacturing sector where benefits from exports could help the overall economy has waned since the mid-1990s. Instead of relying on the outside to boost our economy, we must pull up potential and demand from within to enrich our economy and society.
Translation by the Korea JoongAng Daily staff.
*The author is the head of the Federation of Korean Trade Unions Research Center.
by Lee Jeong-sig