Union power

PUBLISHED : Friday, 22 August, 2003, 12:00am
UPDATED : Friday, 22 August, 2003, 12:00am


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North Korea calls itself the workers' paradise, despite a near-bankrupt economy and chronic difficulty feeding its people. These days, however, the title should go to South Korea.

After struggling for more than 10 years, labour unions have secured higher pay and better conditions that allow workers to live comfortably in ways that were unimaginable before.

But strikes continue to erupt, forcing hard-pressed management to make more concessions. In negotiations with management, as well as with the government, the unions sometimes even resort to violence to extract their demands. No wonder so many South Korean businesses want to move their domestic facilities to other countries like China, which have cheaper and more peaceful workers.

Consider the recent collective-bargaining agreement between the union and management at Hyundai Motor, the country's largest car manufacturer. After more than 100 days of negotiations and 40 days of stoppages, management gave in to most of the union's demands. They agreed to reduce the working week from six to five days without any salary cuts.

In fact, a hefty pay rise was also agreed, increasing the average annual income of workers with 15 years' experience by nearly 20 per cent, to US$50,000. Even more serious, management accepted the request for prior union consent in case it wants to move a plant or cut production.

Critics warn that Hyundai Motor's labour accord will set a bad precedent for intrusive union involvement in management at other companies. Indeed, following the one-sided agreement, Hyundai Motor's share price dropped; investors were concerned that additional labour costs will hurt profits. Angry internet users sympathetic to management also launched a cyber campaign to boycott Hyundai cars.

South Korea's fast economic growth was, in part, made possible by authoritarian regimes that harshly suppressed workers' wages and rights. So its labour-management relations needed some adjustment.

As a member of the Organisation for Economic Co-operation and Development - the so-called rich nations' club - South Korea should not rely so much on workers' sacrifices to power further growth.

But enough is enough. Workers at large South Korean companies now earn wages that are among the highest in Asia. Following the new agreement, Hyundai Motor employees will get about 160 days off a year - the highest in the world.

Yet not all South Korean workers are so well off. Employees of small companies with weak unions do not enjoy such generous benefits. Unlike big unions that wield great influence, these small players have hardly any say in their companies' management.

For example, observers worry that Hyundai Motor's subcontractors could come under great financial pressure if management tries to transfer some of the burden of the higher wages to its small and weak parts suppliers.

Meanwhile, as the government struggles to find ways to curb the ever-growing influence of the big unions, the country's industrial competitiveness continues to slide - especially compared to that of China.

In a decade or so, many leading South Korean companies in electronics, steel, shipbuilding and machinery expect their Chinese competitors to overtake them. Excessive management concessions to unions will only expedite the process.