How not to reach a deal

The government-mediated talks between the corporate and labor sectors to reform the labor market collapse. The government struggled to keep the dialogue alive even after the tripartite committee failed to reach a settlement by the March 31 deadline. That outcome was hardly surprising. It was somewhat predictable. Here are some tips to avoid the same mistake in future negotiations.

The labor representatives presented five so-called unacceptables. They opposed extensions of two-year contracts for irregular or nonsalaried workers, revisions of working hours, the extension of the retirement age through a peak-wage system, restructuring of the base pay definition, and easing of regulations on layoffs and other employment guidelines for salaried workers. They were defensive on the issue of reforms in employment, wages, and working hours. They were particularly resistant to any easing in the regulations on layoffs and employment guidelines. Union leaders might have considered the matter close to their hearts. They campaigned for an increase in the minimum wage, job security for the irregular work force, stronger social security and better labor rights. They emphasized higher minimum wage and employment insurance the most.

A deal could have been struck by selecting what the labor sector opposes most as a quid pro quo for what they desired most. Then why did the negotiations fail? There were several reasons. The government already announced the areas the labor sector was arguing for. In other words, it lost its bargaining chip. For instance, Choi Kyung-hwan, deputy prime minister for the economy, said the minimum wage should be raised by more than 7 percent in order to revive domestic demand. He met business leaders and employers in March to persuade them.

A hike in the minimum wage would inevitably lead to an increase in unemployment pay. Unemployment benefits are legally set from 43,000 won ($39) to 40,710 won, 90 percent of the minimum wage. If the minimum wage is raised, so is the ceiling of unemployment benefits as it is based on the minimum wage. Employers’ offer to raise the minimum wage and unemployment pay could have led to a deal with the labor sector, but the opportunity for negotiation was lost because the issue was publicized before the two sides could discuss it.

Second, stronger social security is a safety net for workers without job security. It would add security in the labor market, but would not be a life-and-death matter for unions, which mostly represent the permanent work force at large companies. In short, the issues the labor sector dislikes are the ones that draw society’s attention more than the issues they are negotiating for.

Lastly, the government was tactless in pushing for its most important goal: relaxation of employment regulations to add flexibility and mobility in the labor market. It insisted on an issue that labor is most sensitive about and ruined the negotiations. Easing regulations on layoffs and rigid employment regulations is critical to reforming the labor market, but if unions are so vehemently opposed to it, the government should have reserved it as a longer-term goal in order to save the negotiations. Because it stuck to that issue, it failed in other areas that could have produced immediate benefits such as expansion in the scope of hiring irregular workers and moderation in working hours. The changes could have helped to broaden employment opportunities and facilitate the government’s goal of attaining 70 percent employment. The government could have achieved a consensus on making new jobs if it put off revisions in layoffs and employment guidelines.

The government and companies were clumsy, but the unions are largely at fault for the failure of the talks. If labor goes on strike because the government pushes ahead with the areas that had been partly agreed to during the negotiations, it could lose public confidence for being too calculating. The people are already weary over repeated failures in labor talks. Public disgruntlement over employment problems for young unemployed people and the irregular work force as well as employees in small and mid-sized companies could be directed at the union representative bodies, which are comprised of workers in large companies with secure jobs.

The labor sector should therefore give the go-ahead in the areas that it partly agreed to, such as the revisions in the definition of base salaries, retirement age, and working hours, for legislative review. Other areas such as easing of rigidity in the labor market and strengthening of social security should be discussed further through research and hearings into various aspects in regards to the legal side, labor-management relationship, and labor economy.

This is the only way to find a breakthrough in the bottleneck in labor market reforms. The tripartite negotiating arrangement could forever be killed if it wastes its negotiation momentum again. Labor unions could forever lose a legal framework where they can argue for their rights. All of the negotiators of the Economic and Social Development Commission are advised to adopt compromising skills and farsightedness.

Translation by the Korea JoongAng Daily staff. JoongAng Ilbo, April 13, Page 29

*The author is an economics professor at Sunkyunkwan University.

by Cho Joon-mo