EDITORIAL from the Korea Herald on Jan. 12)

A social pact

The government's promise to create 100,000 additional jobs this year sounds
hollow. Companies are slashing their payrolls. More convincing is the prediction
by the government-funded Korea Development Institute that an increase in the
number of jobs will near zero percent during the first quarter of this year.

Layoffs will more than offset job creation if the nation is driven into
recession, which is more than a remote possibility. In his first emergency
economic conference with top policymakers last week, President Lee Myung-bak
warned that a recession was looming and that the government needed to be prepared
for it.
But no sense of crisis can be found in trade unions. True, the Federation of
Korean Metal Workers Trade Unions recently proposed a reduction in work hours in
exchange for a ban on layoffs. The proposal, however, was mere lip service, given
that the federation, the largest affiliate of the Korean Confederation of Trade
Unions, made no mention of corresponding pay cuts.
Instead, the militant labor group demanded companies donate 10 percent of their
profits to establish special funds for workers. It also called for a massive
increase in the government-set minimum cost of living, which serves as a
reference in negotiating wages. Such demands could not easily be made even if the
economy were booming and labor were in short supply.
The Federation of Korean Trade Unions, a more moderate national labor group, is
also flexing its muscles ahead of negotiations on the revision of labor laws and
other issues with the government. It is threatening to stage a general strike and
launch a campaign to oust the labor minister if the government ignores its
demands.
More sensible trade unions would concentrate on concluding a social pact, instead
of making demands that would fall on deaf ears among corporations and the
government. Of course, the rationale for drawing up a social contract is the
protection of jobs against the deepening economic crisis. Korea could emulate the
Netherlands, Ireland and some other European countries, which have successfully
weathered economic crises in the past by adopting social pacts.
The Economic and Social Development Commission - formerly the Korea Tripartite
Commission - recently proposed a social pact whereby labor makes concessions on
wages and work hours for job sharing and management refrains from laying off
workers.
The proposal has since received few favorable responses from trade unions. But it
will not be too difficult for the Economic and Social Development Commission, an
advisory presidential panel, to entice labor to enter into a social pact, as its
predecessor did back in February 1998.
The Korea Tripartite Commission, established in January 1998 when the nation was
undergoing the Asian financial crisis, successfully negotiated a social pact on
the introduction of layoffs and the legalizing of a teachers' trade union the
next month. Few alternatives were available to labor when the specter of mass
bankruptcies was tightening around their necks.
The nation is faring little better now than during the Asian financial crisis, as
noted by the chairman of the Economic and Social Development Commission.
Moreover, a consensus among Korea's economic think tanks is that the worst is yet
to come.
Both employers and employees may complain that the incumbent administration is
not throwing its full weight behind the commission's proposal, as the previous
administration did back in 1998. As the commission said, however, the government
would have to subsidize corporations committed to maintaining the present level
of employment.
But the direct involvement of the government, though preferable, is not a
requirement. As some of their European counterparts did, Korean unions and
corporations will be able to gain much from a social contract even in the absence
of active government support.
(END)