Seoul Sees 2 Mil. Jobless in Post-IMF

People’s Korea, 9 December 1998

Disregard salary cut and forget winter bonus. Many Seoulites agree so as they lament the fate of some 2 million ex-workers pounding the pavement in this chilly winter cold.

Take case of Kim Myung Yun, 39-year-old hat vendor in Ansan, who was interviewed by Washington Post (I Can’t Make Anything Work Out 11/22/98) to uncover the skeleton in the closet.

It’s almost noon, and there hasn’t been a customer for hours, Kim is fidgety when a customer picks up a New York Yankees cap and checks himself out in the side view mirror of Kim’s car.

I look good in hats, he says. That’s because they cover your face, his friend shoots back.

Kim laughs with them and relaxes a bit. Still, for a guy who was a white-collar manager making $40,000 a year until he was laid off five months ago, its tough to work this hard for a $4 sale.

I feel guilty when I look at my family, Kim, former sales chief at Korea Life Insurance, a large firm in Seoul, says with his eyes filled with tears. In my heart I want to give my wife and my daughters everything, but I can’t make anything work out.

In Ansan, a suburb of Seoul, businessmen with black briefcases stride by in a hurry, and well-dressed women on their way to shops clickety-clak past, all avoiding a glance at Kim, who is sitting on the dirty curb with his head down.

Kim used to be one of them. He was management, a suit, a comfortably middle-class provider for his family. But since his company laid off 76 workers at the end of June, he’s ended up here, waiting for someone to stop and shop at his Hat Department Store. Kim admits he has no plan for when the unemployment checks stop around Christmas.

The government says growth in new high-tech fields plans to train more than 300,000 workers in computer programming and promises loan to help entrepreneurs start new ventures. But at Kim’s kitchen table, where beans have replaced meat on the family’s dinner plates, those programs look like something conceived in some academic bubble far from the realities of the streets.

Even if I take these courses, would I really be able to get a job when all these companies are laying people off? Kim says. I have plenty of friends who have taken those courses, and they don’t have jobs now.

This is the pain hidden behind the doors of hundreds of thousands of south Korean homes as families struggle with the country’s worst economic disaster in nearly a half century. Mostly middle-aged men, or too old to be rehired, they are victims of industry layoff ordered by International Monetary Fund in December last year in exchange for colossal $58.35 billion loan package.

Through its financial blackmail, the largest amount ever negotiated, the U.S.-led IMF virtually took over the south Korean economy, insisting soul-wrenching term for its loan: layoffs.

Nominally in order to what IMF calls check won from fleeing the country, (essentially in a bid to install dollar-oriented market in Seoul) it required south Korea to pursue belt-tightening austerity and halve its GDP growth rate for this year to 2.5 percent.

Unable to keep up with the lowest growth rate in its history, more than 20,000 companies have gone bankrupt and unemployment rate quadrupled to 8.5 percent. (Comparable figure is found in Japan, also hit hard by lingering Asian financial flu, which stands at 4.3 percent.)

Small-and-middle-size firms will be sold as firesell in the name of M&A, since foreigners now can buy as many south Korean stocks as they want under the IMF. Labor circle fear the total jobless may go as high as 3 million in the nation’s work force of 12 million.

Those lucky enough to stave off mass dismissal have no choice but to accept free-fall salary cut—reducing average monthly pay $1,000 to dangerously low $300.

Although Seoul marked the first anniversary since it turned to IMF on Dec. 3, 1997, cutthroat austerity continues to grip Seoulites, while debt-saddled chaebols, gigantic conglomerates owned by influential tycoons, are dragging their feet to slim down their multi-tentacled businesses.

After all, the blame for the country’s economic mess directly goes to the chaebols-politicians backroom hanky-panky.

By recklessly borrowing billions of money from compliant banking system (created by the authorities in exchange for bribes), chaebol juggernauts have expanded themselves freewheely until they accounted for 30 percent of GDP in their total assets.

After the domestic money dried up, they turned to foreigners, borrowing money from just about every major bank of the world—Chase, Bank America, Citicorp, J.P. Morgan, Goldman Sachs, Morgan Stanley, Salomon Smith Barney, Deuth Bank and Bank of Tokyo Mitsubishi.

The bicycle economy cost Seoul too much: snowballed $200 billion foreign debt. Though belatedly, the authorities clang to the IMF, which gave them cold shoulder instead.

The IMF bailout, as expected, did not bring about capital inflows into Seoul but served the interests of foreigners, enabling U.S., European and Japanese banks to cash in on Seoul’s short term debt.

The IMF-led interest rates hike (as many as 20-30 percent) also worked wonder for foreigners who made a killing by saving in won while non-viable domestic firms collapsed unable to borrow money from banks, thus unveiling longtime capitalistic math: the rich getting richer and the poor getting poorer.

Having kicked out of the workplace all of a sudden, 2 million jobless people demand the authorities provide them with social safety net and urge the chaebols untangle their empires.

Their demand, so far, falls on deaf ears.

Under the unemployment benefit system which was initiated by the regime on July 1, 1995, the unemployed can receive about 50 percent of his/her normal wages after 14-day waiting period for a period of 30 to 210 days depending on the length of contribution.

These regulations fall below the ILO standards which state that 50 percent of the total wages be paid to the unemployed after a 7-day waiting period for a period longer than 182 days.

The top five chaebols—Hyundai, Samsung, Daewoo, LG and SK groups—have made little progress to date in restructuring.

The top five’s debt-to-equity ratios, which range from 370 percent to 570 percent, had increased rather than decreased during the crisis year.

The target of lowering the average debt-equity ratio to below 200 percent by the end of next year now appears unrealistic, professor Re Pil Sang of Korea University in Seoul said, referring to the goal agreed between the IMF and Seoul.

In a survey published on Nov. 30, 93.6 percent of the citizen denounced the chaebols’ overborrowing and business-political tie-up as the main causes of the country’s economic doldrums.

Financial officials point out that the five groups are shouldered with 160 trillion won ($128 billion) in total debt, including corporate bond and commercial paper issues, at the end of November, up from 143 trillion won in December last year.