South Koreans may end a legacy of lifetime employment this week with a new law testing a shaky compromise between labor, management, and government.
Too many managers, secretaries, and laborers have weighed down South Korean companies for too long, economists say. Serving semiprotected markets and subsidized by affiliates, redundant workers had the tacit assurance of jobs for life.
But under the watchful eye of the International Monetary Fund and foreign investors, Koreans are paving the way for layoffs and union-busting workers as they give reassurances and new rights to unions. New labor-market flexibility, along with financial-market reform, is a primary condition for South Korea to continue receiving IMF rescue loans.
The bill is expected to pass before the National Assembly adjourns on Saturday. Its passage comes none too soon. Up to 35 percent of Korean workers may be unneeded, estimates William Cheigh, a Seoul-based consultant at William and Mercer, an international human resources consultancy.
Currently, companies must get approval from unions or receive a court order to lay off workers. If the new bill passes, they will only have to notify the unions. To circumvent the current, convoluted process, companies fired workers under euphemisms like "honorary retirement." Workers were pressured into taking special retirement packages, believing that benefits might not be around if they waited to retire later. A more formal, legal process could end the sneaking around.
Also, the government must quickly weave a new social safety net for the estimated 1 million workers who will be tossed out this year. A $3.15 billion unemployment fund is included in the recent agreement, but labor advocates say job training, a good pension system, and low-rate loans are also a must.
THOSE with jobs will find a more rationalized, Western work environment. Normally, age, rather than job performance, is the yardstick by which workers are promoted. But the economic crisis has given impetus to switch to performance-based promotion. It's not an easy transition in a country where seniority is prized.
The new agreement stipulates layoffs for "urgent reasons" only. Employers must try to maximize employment through worksharing - reducing hours and freezing wages. And dismissals must not target women in Korea's male-dominated society. What worries some analysts is that companies must try to rehire laid-off workers, even inefficient ones. But even these conditional layoffs wouldn't have been possible without the urgency of the Asian crisis. Last year, an attempt to introduce new labor laws was rebuffed by nationwide strikes, critics point out.
This year's cooperation "must be impressive to everybody," said James Wolfensohn, president of the World Bank, on a visit to Seoul last week. But the success of reforms depends on welfare implementation by the government and the restraint of unions and financially desperate corporations.
South Korea's social stability hangs in the balance, observers say. Dissent over layoffs hasn't ebbed. Grueling discussions led to the provisional agreement, but hours before it was officially signed Feb. 10, a group of labor leaders stormed out because their union members protested, threatening to strike unless they can renegotiate.