Gwangju’s bold experiment

The city of Gwangju is pushing forward a novel idea of cutting salaries for local employees at car companies nearly in half. If implemented, the plan will help the city attract car manufacturers by drastically lowering assembly-line workers’ yearly salary to 40 million won ($36,607) from 90 million won on average for those at domestic car companies.

The city has been bent on achieving the goal since 2014 after inviting a former union leader of Kia’s Gwangju factory to become head of its Social Integration Group. But the endeavor failed to produce any tangible result due to an outmoded legal system and vehement resistance from workers.

Gwangju’s initiative attracts our attention given the minefield of unreasonable labor policies and practices in our labor market. Considering that the average job-seeker hopes for a salary of 30.9 million won, according to research by the Korea Employment Information Service, a yearly income of 40 million won is a dream for a countless number of our jobless youth. The plan is not aimed at diminishing existing employees’ salaries, but only to offer slightly lower wages to workers at car companies built in a separate area of Gwangju.

Advanced countries seek to gain economic momentum through such aggressive policies. The Swedish Trade Union Confederation agreed with companies to cut new employees’ salaries by as much as 25 percent in 2013 due to skyrocketing jobless rates among the young generation. The initiative led unemployment rates to plunge by nearly half from last year. Workers and management of Volkswagen even set up a worker-dispatch company in 1999 with the city of Wolfsburg and currently more than 10,000 workers are dispatched to work for the car company. Once a ghost town, the city has been transformed into one of the most vibrant places in Germany.

Could such a dramatic turn occur in Korea? The answer is no. The combative Korean Confederation of Trade Unions will call for a strike immediately. Even if the umbrella union reluctantly approves it, the company will likely end up paying salaries exceeding the 90 million won average.

If labor laws are not ammended, local governments can hardly create new jobs. GM Korea’s attempt to move to another country also stems from legal restrictions and reliable opposition from labor. The government is on a crusade to reform the labor sector beginning with the wage peak system. It must first fix the laws to give impetus to local governments’ reinvention drives. Labor unions too must help our frustrated youth find jobs.

JoongAng Ilbo, May 12, Page 34