Stage Set for a Historic Encounter: KCTU Calls for Negotiations and General Strike

KCTU Action Alert, 20 May 1998

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Korean Confederation of Trade Unions, at the extraordinary session of the National Congress, on May 20, 1998, has decided to call for a direct negotiation with the government on a number issues raised by the current situation.

Negotiated Settlement or General Strike

If the government does not respond to the call for negotiation, KCTU will launch first warning strike on May 27, 1998. It will be followed by the second wave general strike on June 10, if the government continues its intransigent attitude.

The KCTU platform of demands is composed of five parts.

• Repeal of the legal provisions for mass dismissal and temporary employment agencies; Eradication of rampant illegal dismissals and other unfair labour practices
• Measures to ensure employment security and basic livelihood
• Comprehensive institutional provisions for unemployment relief
• Eradication of the collusion between the government (political parties) and conglomerate business; Break up of the chaebol system; and guarantee trade union (employee) participation in corporate governance
• A comprehensive review (re-negotiation) of the IMF conditions.

On May 16, 1998, at the nation-wide rally—planned to be held in 10 major urban centres throughout the country—president Lee Kap Yong declared a month of intensified campaign to back up the KCTU demands and its negotiation.

KCTU called on the government to begin negotiations by delivering its demands to the Blue House, the presidential palace.

The launching of negotiation with the government is combined with the plan to bring all the campaigns undertaken at individual unions at the enterprise levels and industrial federations into a centralised national campaign.

Tripartite Council Process Not Ruled Out

KCTU, however, has not ruled out the possibility of a Tripartite Council process despite its call for direct negotiation with the government. It will depend entirely on the attitude and response of the government to KCTU’s demand for national central negotiation.

The negotiations over the KCTU’s demands can be undertaken in a Tripartite Council process if the government is prepared to include the five demands in the Council’s agenda, and elevate the status of the Council into a body which is capable of concluding a binding agreement.

Currently, the government insists that the Council is merely an advisory body commissioned to present recommendations to the President.

KCTU Demands in Detail

1. Repeal of the Mass Dismissal Law and the Temporary Employment Agency Law; Eradication of rampant illegal dismissals and other unfair labour practices

KCTU calls for the repeal of the provision for Dismissals for Managerial Reasons (Article 31, Labour Standards Act) and the Act Relating to Protection, etc. For Dispatched Workers, the two laws introduced in February 1998 in the aftermath of the Tripartite Council process under the shadow of the threat of a ’national moratorium’.

The provision concerning ’layoff’ in the Labour Standards Act is titled Restriction on Dismissal for Managerial Reasons. Despite the name, the law has not been used as a means to ’restrict’ layoffs, but, as a god-sent mandate to wield the ’weapon’ of dismissals in the pretext of ’economic crisis’.

This is demonstrated by the complaints filed at the various regional Labour Relations Commission for ’illegal dismissals’. The Central Labour Relations Commission, in its bulletin dated May 15, noted that a total of 1,401 cases of complaints against illegal dismissals was lodged by its regional commissions in the first four month of 1998.

The trigger-happy dismissals sweeping through the workplaces following the introduction of the provision reveal either or both the inability/unwillingness of the government authority to police and enforce the law or the willful and malicious abuse of the law by employers. It is safe to say that there has not been any significant case where an employer has made every effort to avoid dismissal of workers and conducted sincere consultation with the union at the workplace with regard to the possible methods of avoiding dismissals as called for by the law.

Another provision of the law which has become mere print marks on law books due to employers’ ill-will is the stipulation that there shall be no discrimination on the ground of gender, as women workers became the first target of dismissals.

KCTU believes the law which permits operation of labour supply business has opened the door to a widespread replacement of regular full-time workers with temporary workers. In most cases, the existing full-time workers will be dismissed and asked to sign a contract with a labour supply business firm which is contracted to supply labour to the company. Most of the conglomerates in Korea have subsidiary companies engaged in labour supply. Further mistrust of the law was spawned by the list of permissible jobs to be filled by ’dispatched workforce’ announced by a Presidential Decree.

The anger of workers against rampant abuse of the ’layoff law’—and thus the call for its repeal—is further fuelled by the inability of the government to rein in the employers. As of May, only one employer has been arrested awaiting for trial on the charge of illegal dismissal.(A person charged with ’illegal dismissal’ can be punished by imprisonment of less than five years or by a fine not exceeding thirty million won [LSA 110].)

On April 22, KCTU lodged legal complaint against 38 employers for blatant unfair labour practices, such as, illegal dismissal, repeated failure to pay wages, and attempts to destroy unions. The prosecutors office has not charged anyone until now despite the fact that the Ministry of Labour has supplied official recommendation that there were clear illegal practice at least in 6 of the workplaces noted by the KCTU suit.

Failure to pay wages is another blatant unfair labour practice which has become a norm in the pretext of ’economic crisis’. Recently the Ministry of Labour released a report that, as of April 30, 1998, some 85,741 workers in 1,807 workplaces nationwide had not been paid wages totaling 340 billion won, equivalent to US$ 230 million. This figure, however, proved to be less than a partial picture, as the figures for a single industry turned out to be much greater. According to a survey made public on May 13, 1998 by the Korean Metal Workers Federation, the largest industrial federation within KCTU, with a membership of around 200,000 workers, some 137,821 workers in 78 KMWF unions had not received a total of 525 billion won (US$ 350 million) in unpaid wages. As KMWF figures are limited to the metal industry and those workplaces it represents, the real situation can only be much worse. (Only three employers are currently arrested for willful failure to pay wages.)

Many unions, shackled by the ’terror’ of ’economic crisis’, threat of mass dismissal, and rampant unfair labour practices, are further debilitated by the employers’ dismissal of collective bargaining agreements.

The employers have exploited the climate of ’economic crisis’ to abuse the legal provision allowing unilateral termination of the collective bargaining agreement. Article 32 Paragraph 3 (amended on February 20, 1998) states that one party concerned may terminate the collective agreement by giving notice to the other party six months in advance of the date he wants to terminate the collective agreement.. This means that workers may lose the coverage of a collective agreement three months after the expiry date of the agreement if the employer gave a notice of termination three months prior to the expiry date. This is based on the provision that the existing collective agreement shall remain effective for another three months after its expiry date if no new agreement has been concluded by the expiry date.

Hundreds of employers have exploited this clause to terminate collective agreements which outline the working conditions, welfare provisions, wage rates, etc. This is based on cynical attitude of the employers who are emboldened by and comforted by a (false) knowledge that workers and unions will not be able to do anything to resist in the situation where employer wields the power of dismissal mandated by the crisis and the IMF.

The lawlessness in the workplaces is fanned by the Ministry of Labour. On April 26, 1998, the Ministry of Labour asserted through an authoritative interpretation that an employer shall not be liable for criminal charges for failing to reach an agreement with the union if the dismissals were undertaken in accordance with the conditions and procedures stipulated in the paragraph 1 or paragraph 3 of the Article 31 of the Labour Standards Act [which provides the conditions for legally acceptable layoff] even if the collective agreement contains a provision calling for prior agreement between the employer and the union in case of layoff.

What the Ministry of Labour has done in its authoritative interpretation is to undermine the very ground and authority of a collective agreement between a union and an employer as a contract which has a legal status.

KCTU calls for a resolute action of the government and its supervisory and prosecution authorities to put an end to the lawlessness of the employers. Furthermore, those workers who have been illegally laid off by wanton employers should be reinstated.

2. Measures to ensure employment security and basic livelihood

As a part of its demand for employment security and guarantee of basic livelihood, KCTU calls for lowering of the legal working hours to 40 hours per week from current 44 hours [LSA 49]. Korean workers, in 1997, worked an average of 49 hours per week.

It is widely recognised that Korean society, state, government and families lack or are incapable, in the current context, of providing meaningful unemployment relief. Already, the official unemployment figure has soared above 1.5 million (7%) from around 2% prior to the onset of the crisis.

There are many signs of social disintegration: sharp increases in suicide, crime, ’vagrant’ [homeless] people.

KCTU believes the most effective means to minimise the social impact and damage to families in the current crisis is to minimise unemployment.

The government, employers, unions, and all responsible groups in the society, KCTU believes, have a common interest in minimising unemployment in controlling and the uncertain consequence it may bring. All parties, therefore, must make a commitment to share the burden of maintaining maximum employment in the current crisis. Such a commitment and burden-sharing can be facilitated by a general reduction of working hours to 40 hours a week. Reduction of working hours—together with concerted efforts to avoid overtime—will set the basic conditions for retention of labour necessary to avoid massive break out unemployment.

KCTU also calls for additional reduction of working hours is required for some industries, such as automobile industry. Reduction of working hours to 35—38 hours a week, KCTU, believes, is required to retain employment as a part of a joint effort to minimise mass unemployment which is bound to lead to severe social problems.

The reduction of working hours will have an effect of creation of 2 million jobs.

KCTU calls for a guarantee for effective trade union participation and co-determination in the process of structural adjustment. The current attempts at industrial restructuration or structural adjustment of the banking sector, undertaken unilaterally by either the government or the companies themselves will result in irrecoverable damage to the economic and social infrastructure. Furthermore, the current unilateral blind drive will not be able to obtain the social consensus necessary for the acceptance and sharing of the burden and impact of the massive restructuring needed for a genuine reform.

The massive restructuring will place extremely heavy burden on Korean society and its current and future population—in terms of additional tax burden required for financing the restructuring process and its consequent debt burdens and also in terms of job losses. [Some research institutions estimate the total debt accumulated by private companies in Korea to be 1,000 trillion won (2.5% the GDP) and that some 81 trillion won is required just for the restructuring of the banking sector. In one way or another much of the burden of restructuring will fall on the ordinary people.]

The only way such a burden can be accepted by the people, including workers and unions, and shared evenly among the whole of the society is in building a genuine social consensus. But such a consensus can only be achieved by effective and genuine participation of the very people who have to shoulder the burden in the very actual and concrete recognition. This is especially important in cases of merger, acquisition, or transfer of business.

KCTU also calls for a tripartite commitment by the government, employers, and unions [workers] to guarantee the maintenance of a liveable wage. Furthermore, KCTU calls on the government to extend the coverage of unemployment insurance and other relief schemes for all workers laid off in a negotiated redundancy worked out between the union and the employer.Currently only about 70,000 unemployed persons out of the 1.5 million officially counted employed receive any kind of unemployment insurance benefit.

3. Comprehensive institutional provisions for unemployment relief

KCTU calls for the introduction of an employment security tax as a progressive capital gains tax to be levied on interest or investment earnings more than 50 million won. [This requires a reform of the capital gains assessment regime as the current system is limited to tax assessment and levy on individual accounts of investment, rather than on a person regardless of the number of separate investment account.]

Additional funds for unemployment relief and employment maintenance can be obtained from a meaningful reduction in military spending, especially weapons import. A strict legal action or moral pressure against fraudulent business dealings to recover ill-gotten gains can not only add to the general fund available for unemployment relief and employment security, but generate a much wanted sense of fairness.

KCTU believes such efforts can raise up to 20 trillion won in revenue. The fund can be used to finance the unemployment relief fund and various employment retention efforts. It can be used to assist employers willing to retain workers either on job or in in-house training (or combination of both) or used to compensate for loss in wage due to greater reduction in working hours. It can also be used to create effective job training facilities, assist unions in providing needed services to displaced members.

Such a revenue-creating programme is entirely different from the various unemployment relief programmes promised by the government so far. The Kim Dae Jung government is committed to make available some 7 trillion won for unemployment relief and employment retention. But this sum is made up of the existing fund in the employment insurance contributed by employers and employees, parts of structural adjustment loans from the World Bank, and specially issued employment bond. As a result, much of the money available to unemployed workers are in form of loans that needs to be repaid. These schemes can in no way be understood as genuine unemployment relief, nor genuine government or social commitment to provide meaningful social safety net, let alone a comprehensive social welfare or effective active labour market policy.

Government must also prepare for the introduction and consolidation of broader social welfare system, including low-cost quality education (which will remove the need for families to spend as much as the government education budget on information supplementary education), universal health insurance system with low cost quality medical service, housing allowance. [This will transfer much of the current company provided welfare to the domain of society and state, thus solving much of the problem of equity inherent in the current system. It will also remove some of the burdens felt by companies.] Unemployment insurance system must also be reformed towards a more universal system, whose benefits are available to all unemployed people who have lost jobs and first-job seeking young people.

These reform efforts, naturally, call for a genuine reform of the taxation system, towards one oriented to meaningful redistribution of wealth and social solidarity.

One change which will not require financial commitment on the part of the government is the change in the law concerning trade union membership eligibility. Unemployed people must be allowed to join or maintain membership with trade unions. Given the currently dominant enterprise unionism, unemployed people should be allowed join a union organisation that exists outside enterprise boundary. This change, while not requiring any financial outlay, will be one of the most effective way of countering the ill-effects of mass unemployment.

4. Eradication of the collusion between the government (political parties) and conglomerate business; Break up of the chaebol system; and guarantee trade union (employee) participation in corporate governance

Government must strengthen the anti-corruption regime, not only to remove fraudulent internal transactions within family of companies, but also to severe the sinister ties between politicians and bureaucrat and the business.

The chiefs of troubled chaebol groups must be forced to move out of their current position. The automatic or unquestioned hereditary succession of managerial powers to the children of chaebol chiefs -- nepotism—must be checked. A great portion of the private funds of chaebol chiefs obtained through company activities which have driven the company into drastic financial difficulty must be returned to the company to be used as a fund for employment retention.

The companies which receive public fund to overcome the financial difficulties must establish mechanisms for public, democratic, and social accountability. This—perhaps together with minority shareholder rights—is one of the most effective ways to introduce transparency. One important element ensuring transparency and accountability is effective trade union or employee participation in the supervision of the management and work-level decision making process.

These efforts can be meaningful only if they are grounded on legal foundation. Therefore, government must introduce a ’co-determination’ law to guarantee effective employee, trade union, and social participation in the some levels of supervision and management of companies.

Government must act immediately to guarantee full freedom of association by allowing teachers and white-collar government employees the freedom to join or form a trade union.

5. A comprehensive review (re-negotiation) of the IMF conditions.

Much of the above demands, to be realised, will require a thorough restructuring, reshaping, reorienting of the very strict and narrowly framed conditions agreed between the Korean government and the International Monetary Fund. KCTU is certain that the reforms contained in its demands will pave the ground for effective reform necessary for and capable of restoring international confidence and attracting healthy level of foreign investment. In its course, therefore, the KCTU-driven reforms will be able to alleviate all the concerns of IMF had in extending its stand-by credit.

However, in order to facilitate some of these reforms, there is a need to readjust some of the requirements suggested by the IMF. The explicit call for labour market flexibility (the introduction of legal provisions for layoff and temporary employment agencies) needs to be recalled. The rigid adherence to arbitrary BIS standard, the prescriptions for high interest rate and low growth rate, austerity fiscal and monetary policies needs to be reconsidered. These conditions, in the way they currently stand, can have severe negative impact on the capacity of the Korean economy to recover and the capacity of Korean society to develop a genuine social consensus and a policy regime based on it. The IMF policy package must furthermore address the negative impact of international speculative capital which can cause critical disruption in any economy. The IMF conditions also need to take normative and social dimension into consideration, by giving recognition to the importance of employment and trade union rights issues in all economic activities, including the activities of foreign investors.

The Crisis Calls for a Real Reform

KCTU believes that the crisis that Korea is besieged with not a simple one. In many ways, it is a legacy of authoritarian system and one dimensional adherence to idol of growth. The demand of economic growth, for over 30 years, was worshiped as the paramount goal. In doing so, Korea has neglected social considerations, and failed to build democratic mechanisms and framework through or on which economic activities and corporate governance are built. While it may be important to restore market mechanisms, we are also keenly aware that they must be embedded in a social and democratic norms and environment.

KCTU believes that the crisis is not just a crisis, but an opportunity to create the long absent social institutions on which healthy economy can be built. It is in this spirit KCTU presents its demands, and wishes to engage in productive negotiations with the government. But, KCTU is also cognizant of the fact that major advances in social rights, justice, solidarity, and democratic institutions which populate much of the world were not achieved in vacuum nor without great tension and struggle. It is in the awareness of this grave reality that KCTU announces that it is willing to draw on all its resources and cunning to combine the pressures of negotiation and mass mobilisation of strike action, the only real weapon available to workers. [INLINE]