[Enemies of Reform⑥] The 'Failure History' of Labor Reform... Competitiveness Hindered by Labor Unions

Labor reform has been a long-standing challenge in South Korea. Although it has been mentioned as a key national agenda every time a new government takes office, it has mostly failed. In many cases, it was not properly pursued due to labor unions' influence, and even when efforts were made, social dialogue failures left only scars and the process ended inconclusively. Meanwhile, South Korea has deteriorated into a 'labor backward country,' suffering from severe labor market dualism and irregular employment issues, repeated strikes, and declining corporate competitiveness?problems rarely seen elsewhere in the world. 'Enemies of Reform'

With the Yoon Seok-yeol administration taking office, the necessity of labor reform is once again highlighted. Both companies, which are losing strength in the rigid labor market structure, and marginalized workers suffering from polarization seem to agree on the need for reform. However, the environment for labor reform is not easy. The Korean Confederation of Trade Unions (KCTU), a major pillar of the labor movement, is linking labor reform to survival rights and has announced an all-out struggle, and it is difficult to gain cooperation from the major opposition party, which has contributed to creating a 'tilted playing field' favoring labor over the past five years.

Labor reform is a battle against established labor unions such as the Federation of Korean Trade Unions (FKTU) and the KCTU. Historically, labor unions have stood in the way of labor reforms that have failed one after another under successive administrations. Experts advise that the new government needs a shift in perception to target ordinary workers rather than the established large unions as the policy focus. They explain that securing public support, not just union support, is essential to avoid repeating past failures and to successfully implement labor reform for national competitiveness recovery.

[Image source=Yonhap News]

◆Unions Blocking Labor Reform

From the Kim Dae-jung administration, which had to push IMF-style reforms immediately after the financial crisis, to the Park Geun-hye administration, which implemented unprecedented broad institutional reforms, labor reform has generally focused on 'flexibility.' This is because companies need to be able to adjust their workforce according to changes in industrial structure, worsening business conditions, and the need to dismiss problematic or low-performing employees to maintain corporate and national competitiveness. Consequently, severe opposition from labor unions has followed each time.

During the Kim Dae-jung administration, the tripartite commission including the KCTU was launched in February 1998, and within three weeks, a compromise covering 90 items was reached. The urgency to overcome the economic crisis played a role. The reforms included layoffs and dispatch systems, which had not been addressed during the Kim Young-sam administration, as well as employment stability, unemployment measures, and social safety net expansion?marking the first broad labor market reform.

However, immediately after the agreement, the KCTU experienced severe internal conflicts over the layoff system and eventually withdrew from the tripartite commission. The Kim Dae-jung administration had to complete reforms with the FKTU. The KCTU developed a 'trauma' from this experience, leading to its subsequent non-participation in social dialogue.

Even under President Roh Moo-hyun, who had a high understanding of the labor movement, when the Non-regular Workers Protection Act (mandating conversion to regular employment after two years of non-regular employment) became a contentious issue, the two major unions withdrew from various labor-related committees, and the KCTU even announced a general strike, causing turmoil. In September 2006, KCTU Chairman Cho Jun-ho declared a "full-scale war" against the Roh administration at the National Public Officials Labor Rally.

During the pro-business administrations of Lee Myung-bak and Park Geun-hye, labor struggles reached their peak. The Park administration succeeded in leading a grand compromise among labor, management, and government in September 2015 after about a year of negotiations on broad labor reforms including irregular workers, working hours, wage systems, and industrial accidents. However, the FKTU broke the agreement after four months, returning the situation to square one. Subsequently, President Park resigned amid the 'Choi Soon-sil Gate' scandal and candlelight protests led mainly by labor groups. A labor official said, "There is a culture of praising those who fight fiercely in unions," adding, "Regardless of the administration, violent struggles have been repeated."

◆Futile 'Pro-Labor'... Failure of the Moon Administration

The Moon Jae-in administration, born from the candlelight protests, focused more on embracing unions than on reform. It promoted pro-labor policies such as abolishing the two major guidelines of the Park administration, raising the minimum wage to 10,000 won, reducing working hours to 52 hours per week, expanding employment and industrial accident insurance, and converting irregular workers to regular employment, under the core national agenda of a 'labor-respecting society.' While some achievements were made, such as improving workers' quality of life, structural problems facing Korean society?such as low growth, inequality, and low birth rates?worsened. Excessive union protection created a 'tilted playing field' between management and labor and an unfair structure where a minority of union members appeared to represent the majority of ordinary workers.

In this process, genuine reform was not pursued. Anti-market populist policies and various regulations severely weakened the business environment, and side effects followed from the uniform 52-hour workweek, rapid minimum wage increases, and the Serious Accident Punishment Act. Kim Dae-hwan, an emeritus professor at Inha University and a senior labor expert who served as labor minister during the Roh administration, criticized at a Korea Economic Federation forum that the Moon administration's 'labor respect' was actually 'union respect,' causing confusion and instability.

Although President Moon advocated a pro-labor government, even social dialogue was not smooth. He appointed Moon Sung-hyun, a former KCTU member, as the first chairman of the Economic, Social and Labor Council, a social dialogue body, attempting a grand social compromise including the KCTU. However, the KCTU stuck to its struggle line, rendering the efforts ineffective. Notably, the KCTU staged a general strike in 2018, just one year after the administration began, demanding expanded rights, shocking the Moon administration, which had shown affection toward labor.

[Image source=Yonhap News]

◆Struggle over Dialogue... The KCTU Risk

The KCTU, which has maintained a struggle-oriented approach, is cited as a major obstacle to labor reform. Among the two major unions, the FKTU is classified as a 'moderate faction' that values dialogue and negotiation, but the KCTU has consistently maintained a hostile attitude toward companies and the government, even staging general strikes during the Roh and Moon administrations. In July last year, when social distancing was strengthened due to the COVID-19 spread, the KCTU ignored quarantine guidelines and held large-scale illegal protests, leading to the arrest of then Chairman Yang Kyung-soo.

Analysts attribute this to the KCTU's inherent limitations, historically possessing a 'struggle DNA.' Founded in the 1970s and 1980s as an organization representing social minorities against government-controlled unions and military regimes, it has exhibited combative behavior, which has served as the driving force for maintaining the organization to this day. Kim Jun-yong, former secretary-general of the National Labor Union Council (the KCTU's predecessor) and current secretary-general of the People's Union, said, "The KCTU's main base is large corporations, public enterprises, and public officials, while workers in construction, call centers, cleaning, and environmental sanitation fight like mercenaries," adding, "They are united by ideology."

◆Urgent Reform Needed for Yoon... Must Shake Off Unions

For the Yoon Seok-yeol administration to successfully push labor reform, it must overcome opposition from such unions. The KCTU has started a general strike beginning with the Cargo Truckers Union and has announced large-scale outdoor struggles through the end of the year, including the National Workers' Rally next month, the Metal Workers Union general strike, and the KCTU general strike in October. Since the government conceded to most union demands during the previous Cargo Solidarity strike, the unions are expected to take an even tougher stance. Although the FKTU participates in social dialogue, it has significant differences with the government on many pro-business national agenda items.

Experts emphasize that despite union opposition and struggles, labor reform must be pursued based on public support. Kim Tae-gi, emeritus professor of economics at Dankook University, said, "Labor reform is no longer just an issue for labor and management but for ordinary workers," adding, "If the public is persuaded that labor reform is for all workers in South Korea, including the youth, it can gain considerable momentum."

They point out the need to resolve the overrepresentation of established labor groups such as the KCTU and FKTU and focus on the majority of marginalized workers. Choi Young-gi, visiting professor at Hallym University’s Business School and former president of the Korea Labor Institute, said, "The KCTU has shown a struggle line rather than compromise, so even if a dialogue table opens, they will not easily participate," adding, "Even if they do not sit at the table, once tripartite dialogue for labor reform begins, they will come into the flow, so it is not impossible without the KCTU."