Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
Pandemic reshapes labor-management relations
Graphics by Bae So-young
By Nam Hyun-woo
By Nam Hyun-woo
The COVID-19 outbreak is changing previous “stringent” labor-management relations at Korean companies, as unions are increasingly embracing the market logic that job security and employees' welfare come only with a company's survival.
Such recognition is growing especially among unions at domestic carmakers, known for their hardline approach, as they have been hit hard from a collapse in global demand and supply chains in the wake of the pandemic.
Following talks between Hyundai Motor and its union last month, the two released a joint statement under which they agreed to “recognize the impact of their business on the country's economy” and “reflect market demand” in setting manufacturing volumes. In doing so, they also pledged to “do their best to improve vehicle quality.”
Upon signing the agreement, union head Lee Sang-soo said, “customer satisfaction through improved quality directly affects our employment and the union will spare no effort to improve product quality.
This is in stark contrast to the union's previous stance, known for its militancy in demanding steep wage increases and improvement in conditions regardless of the market circumstances.
Unlike many other companies, Hyundai Motor is required to get a consensus from its union when the company makes changes to its production plans. For example, Hyundai Motor USA has asked its headquarters in Korea to assemble the Palisade large SUV at its plant in Alabama to meet high demand in the U.S.; but Hyundai Motor is refraining from making a decision because it requires a consensus from the union here.
Due to this backdrop, the union's promise to reflect market demand has greater significance. During the announcement of the joint statement, the two sides agreed that improving vehicle quality and promptly responding to market demand were the best way to overcome the global slowdown.
Given Hyundai Motor union's clout as the largest union for a single company in Korea, the rapprochement is anticipated to influence other carmaker unions, which will begin this year's salary negotiations and collective bargaining agreements (CBA) shortly.
While the unions of Hyundai Motor, Kia Motors, GM Korea and Renault Samsung are expected to start their CBA negotiations in August, SsangYong Motor's union and management already reached an agreement in April, entailing a salary freeze and no new incentives.
This came amid the carmaker's continued losses and subsequent liquidity crunch. With COVID-19 dealing an additional blow, the company is seeking to secure cash by unloading assets and seeking a bailout. Its largest stakeholder, Mahindra & Mahindra of India, is also seeking to secure new investors for SsangYong.
In May, the union of the defense division of Hanwha Corp. delegated this year's salary increase to management, saying it made the decision “for the great cause of overcoming external and internal crises stemming from COVID-19.”
Before Hanwha Corp., the three unions at Kumho Petrochemical in April also agreed to allow management to decide on any salary increase. A pilots' union at Korean Air did the same in February to assist the airliner in its attempt to recover from the fallout of COVID-19.
“One of the most critical shortcomings in the Korean economy mentioned by foreign investors is the stringent relations between labor and management,” Korea Economic Research Institute researcher Kim Yoon-kyung told The Korea Times. “And this shows signs of change in the wake of COVID-19, as unions increasingly understand that they are responsible for their demands. And this can be interpreted as a positive sign for foreign investors too.”
As the unions are showing signs of changing, President Moon Jae-in also encouraged them to break away from their conventional combative relations with management.
“To respond to the changing environment, it is a time for the country to take a step further from the labor-management relations of the past,” Moon said during a Cabinet meeting, July 7, referring to the industrial difficulties stemming from the coronavirus pandemic.
“There is a desperate need for mutual growth and cooperation in a time of crisis, and making mutual concessions is one way to save the country from the crisis.”
Long way to go
Moon's remarks came after the government, lobbying groups representing employers and the country's largest umbrella unions failed to reach an agreement on how to collectively overcome the economic fallout from the pandemic.
The unions tentatively agreed to cooperate with companies' crisis management and their efforts to maintain jobs alongside the the government's support for this, but failed to reach a final agreement as the Korean Confederation of Trade Unions (KCTU), the largest umbrella union in the country, withdrew from the talks at the last moment.
Moon, a liberal president, expressed his regret regarding the actions of the KCTU, saying: “The agreement could have been an important step toward greater concessions between labor and management.”
Problems remain over the new statutory minimum wage. The Minimum Wage Committee set 8,720 won as next year's minimum wage Tuesday, a record-low 1.5 percent hike from 8,590 won this year.
This came after long-stalled disputes between employers who were demanding a 1 percent cut and employees calling for a 9.8 percent hike. Representatives from the KCTU did not participate in Tuesday's vote, while those from another umbrella union, the Federation of Korean Trade Unions, left during the meeting to express their opposition.
Some unions are also retaining a militant stance. The union of Hyundai Heavy Industries staged a four-hour partial strike, July 9, as negotiations over last year's salary showed no progress and the company pushed ahead its planned takeover of Daewoo Shipbuilding & Marine Engineering.
This marked the fourth partial strike by the union this year, while the company is suffering from a deteriorating order backlog.
“To overcome the current crisis, cooperation between the unions and management is essential,” a conglomerate official said. “Those still embroiled in disputes should look at the cases of the automobile, chemical and airline industries among other as important reference points.”