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The Korean Economy Beyond the Crisis

Edited by Duck-Koo Chung and Barry Eichengreen

Providing an integrated analysis of the event and its consequences, the chapters in the book consider the causes of the crisis, the response of the US government and International Monetary Fund, adjustments in the Korean monetary and fiscal policies, and the success of financial and corporate restructuring. The concluding chapters bring the story up-to-date, describing the aftermath of the crisis and assessing whether there has been sufficient reform to facilitate the country’s recovery and growth.
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Chapter 10: Changes in the labor markets and industrial relations

Young-Ki Choi and Dae Il Kim


1 Young-Ki Choi and Dae Il Kim INTRODUCTION This chapter documents changes in labor markets and industrial relations in Korea since 1997. The crisis and ensuing restructuring have had a dramatic impact on the labor market. The workforce contracted by five percentage points in 1998 and did not recover to pre-crisis levels for an additional two years. The shift in labor demand toward skilled workers in the course of restructuring has manifested itself in higher unemployment, widening wage inequality, and a serious deterioration in job quality for unskilled workers. Given unfavorable market conditions, firms attempted to reduce their payrolls, and to make this possible, the government sought to amend the country’s labor laws to allow the layoff of redundant workers. These changes meant that only higher labor productivity would ensure job security. Maintaining and enhancing labor productivity in turn requires smooth and efficient labor– management relations, something that the government sought to achieve by promoting workplace partnership. Achieving such a partnership entails breaking away from the confrontational labor–management relationship that prevailed in the past. Following the outbreak of the crisis, however, workers and unions continued to use confrontation to protect their jobs. Because unions had succeeded in blocking legislation legalizing layoffs of redundant workers as recently as 1996, they had reason to believe that they could do so again in 1998 (despite the fact that deterioration in economic conditions wrought by the crisis was far more severe). Moreover, the history of government intervention in labor disputes fostered the...

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