President-elect Kim’s Saga over Layoff—Poor Safety Net for Jobless Exposed

People’s Korea,29 October 1997

As the IMF nightmare keeps torturing Seoulites, so continues the saga of the president-elect Kim Dae Jung.

Following a marathon wrangling over the much-disputed layoffs, which analysts predict will hit over a million, the labor union on Jan. 20 insisted that the wording of layoffs not be stipulated in the agreement on the Labor-Management-Government Declaration for Pain Sharing.

The tripartite committee, which was composed of the labor, top business corporate and government leaders, concluded its discussions by simply stating that they should cooperate to reach an agreement on the labor issue: a detour expression of layoffs.

Thus, the commission—which was formed by Kim to persuade the labor circles into what he claims inevitability of legal layoffs—postponed any decision on mass dismissals until the legislature convenes next month to set economic policy.

The president-elect Kim tried in vain to legalize layoffs before his economic delegation visited New York on Jan. 21 for more foreign lendings.

As a result of decades-old spending binge justified by the government, south Korea now owes a $153 billion in foreign debt (a whopping over-tripled-jump compared to $40 billion five years ago), of which 60 percent or $91.3 billion is in short-term liabilities due within a year or less.

At the talks in New York over the $57 billion IMF bailout, south Korea managed to win a 90-day extension on short-term debts of $21 billion until the end of March. But it needs further extension of those and other short-term debts due after March.

The Japanese banks account for a large portion of south Korea’s short-term debt of over $60 billion and the IMF, in fact, is acting more to save the good-performing Japanese banks than to save the Seoul government.

That’s why south Korea, in this time of trouble, was asked to issue state bonds worth $25 billion to cover part of the snowballing short-term debts at the New York meeting attended by major banks and investment firms in the world—Bank of Tokyo Mitsubishi, J.P. Morgan, Citibank, ING Bank and Merrill Lynch.

People familiar with the New York meeting said Seoul intended to put forth an alternative plan, but none of the participants would give details or say how it had been received.

Only recently, president-elect Kim announced he would issue 4-5 trillion won state-guaranteed bonds to help pay salaries to the unemployed for a period of time: the would-be victims of the industry layoff Kim envisions.

Meanwhile, president-elect’s camp said it will soon sent a four-member delegation to Mexico to study its successful graduate from the 1995 peso crisis when the country was under $48 billion IMF bailout. They said its delegation will meet with Mexican government officials, politicians, scholars and labor leaders to learn how they cooperated to cope with their country’s economic crisis. Mexico is now talk of the town in south Korea as an IMF success story.

Only time will tell if south Korea will be able to make it or not amid the litany of woes.

• A million more unemployed,
• Thousands more corporate falldown,
• A 10% hike in consumer prices,
• Dwindling services due to pared government,
• A decline in the general standard of living.

Bigwigs Tighten Belts First: Citizens

In short, south Koreans are being asked to make soul-wrenching changes as they struggle to restructure their outdated economy and pay back a record $153 billion foreign debts.

Food prices have seen double-digit rises. A kilogram of flour now costs 800 won (48 U.S. cents), up 60%; cooking oil has shot up 56% in price to 2,800 won a bottle. Petrol prices have risen twice since the start of this year, last rising 32% as of Jan. 17 to 1,215 won a litter.

And then there are the shortages. Hospitals, for one, now have dwindling supplies of imported vaccines and X-ray film as the cost of such items has jumped in relation to the won’s drop.

Surely enough, the blame for the nation’s economic mess directly goes to the government, which coerced the obedient banks to keep huge loans rolling into the family-controlled conglomerates or chaebols until the domestic money dried up: in exchange for bribes.

The chaebols, often derisively called octopuses, brought what was once the world’s 11th largest economy to near collapse by their die-hard practice of reckless over-expansion, deceptive accounting practices and massive high-risk bank loans—only possible through behind-the-door deals with corrupt politicians—knowing such practices won’t survive long.

So-called cross-guarantee payment system (in which company A borrows money from a bank with company B stood as a guarantor on condition that company B does the same...Ed.) is the prime factor for making the country what it is today.

Angry citizens are demanding those bigwigs tighten their belts first, and the nation’s organized labor unions are threatening to go on general strikes if the government approves layoffs.

On Jan. 17, workers and students marched through downtown commercial districts, vowing to fight layoffs that the government say are necessary to attract foreign investors.

About 2,500 protesters marched through bustling Chongro and Myondong districts. No to layoffs! they chanted, punching their fists in the air.

Hundreds of black-helmeted riot police with shields stood guard. No clashes or arrests were reported. Smaller rallies were reported in 10 provincial cities, and the national news agency Yonhap reported that a rally in the southeastern industrial city of Ulsan drew 3,000 workers from Hyundai, south Korea’s No 2 chaebol next to Samsung.

Fight! Fight! the protesters chanted, saying the layoffs will make the poor poorer in a country where the safety net for the unemployment is increasingly weak and poor.

Weak Unemployment System

The Employment Insurance was initiated by the Seoul government on July 1, 1995. This insurance is divided into Unemployment Benefits, Employment Security, and Vocational Training.

Under the unemployment benefit system, an employed person can receive about 50 percent of his or her normal wages after a fourteen-day waiting period for a period of 30 to 210 days depending on the length of contribution. (President-elect Kim, in his Jan. 18 TV debate, said the government plans to give unemployment benefits to the jobless, equal to 50-70 percent of the monthly salary for some 180 days.)

These regulations fall below the ILO standards which state that 50 percent of the total wages be paid to the unemployed after a seven day waiting period for a period longer than 182 days.

Moreover, the unemployment benefit does not amount to providing the worker the means to support his or her family. For example, when a worker with a wife and two children loses his job, he receives only 60 percent of the minimum living costs as the unemployment benefit.

In general, low unemployment benefits not only cause various difficulties in livelihood, but also hinder effective job-seeking activities. In other word, the unemployed can be pressed to seek jobs inappropriate for their skills and experience due to the financial difficulties. This leads to inefficiency in the nationwide labor market which is dictated by supply and demand.

Therefore, if the president-elect Kim reiterates the need for layoffs to attract foreign investments, he should raise high the unemployment benefits before anything else so that a worker can seek a new job in a stable manner and be given opportunities to develop his or her abilities.

Simply putting, hapless south Koreans can’t afford a policy vacuum until president-elect Kim’s February 25 inauguration, although still not due at the Blue House for well over a month.