Kaesong talks end in win-win

South and North Korea agreed on a 5 percent hike in the minimum wage for some 53,000 North Korean workers hired by South Korean companies at the joint Kaesong Industrial Complex, putting an end to a disagreement that dragged on for nearly six months.

Officials from the two Koreas reached agreement Monday to settle the minimum monthly wage for Kaesong workers at $73.87 from the previous $70.35 in a 5 percent hike, an outcome that came amid heightened tensions on the peninsula in the aftermath of the detonation of land mines in the demilitarized zone earlier this month.

Seoul had refused a hike beyond 5 percent, saying it was in violation of an earlier agreement on wage standards. But it had left open the possibility of revising the regulation to expand the hike range beyond 5 percent if the North came to discuss the matter.

“We settled on the wage hike issue with the North on the principle that all issues must be solved through dialogue,” said a government official who was involved in the talk.

“Though we still have a long way to go to resolve remaining issues [regarding the Kaesong complex management], we will strive to reach an outcome that can help South Korean companies increase productivity.”

The dispute over the wage hike began in February when North Korea unilaterally notified the South of a 5.18 percent increase in the minimum wage, which would have raised the wage to $74 from $70.35. The South rejected the demand as it was beyond the 5 percent ceiling stipulated in the labor standards and called on the North to resolve the contentious matter through talks.

While the North backtracked from its initial demand, it could see an increase in pay by over 120 South Korean firms operating at the industrial park, as the two sides agreed to new guidelines on bonuses.

Extra wages will be calculated in accordance with work skills, length of labor and labor productivity, the official said.

The consensus reached on Monday appeared to be a win-win scenario for the two Koreas as the South succeeded in keeping the wage hike at 5 percent, while the North could see increased additional wages from the new guidelines on extra payments. So far, companies dole out extra payments individually without official guidelines. A Ministry of Unification official, who requested anonymity, said monthly bonus payments had been less than $10 per worker without any official standards.

The two sides also agreed that the North should ensure a constant supply of labor, raising the prospect of building dormitories for North Koreans from remote provinces. According to the official, South Korean firms are badly in need of additional labor to meet production targets.

After the two sides came to agreement, concerns that the factory park could be shut down again were dispelled. The North unilaterally withdrew its workers in 2013, which led to a four-month shutdown of the complex when diplomatic ties between the two countries hit rock bottom.

Launched in 2004 after the landmark 2000 summit between the two Koreas, the Kaesong complex has become the last remaining symbol of inter-Korean business cooperation.

The recent land mine blasts in the southern part of the DMZ maiming two patrol soldiers on Aug. 4 further stoked tensions on the peninsula, with the North threatening to “indiscriminately” strike border units that air propaganda broadcasts via speakers. The propaganda broadcasts by the South were resumed 11 years after they were stopped in retaliation for the planting of the land mines, which the North denied responsibility for.

“Judging from the agreement, it appears that North Korea has adopted the principle of the separation of business and politics, especially given its strong condemnation of the ongoing joint Seoul-Washington military drill,” said Yang Moo-jin, a professor at the University of North Korea Studies.

BY KANG JIN-KYU [kang.jinkyu@joongang.co.kr]