Artificial Wage Gap Reduction? ... Is Korea a Socialist Country?

Labor Union-Centered Corporate Bargaining System
Challenges Including Introduction of Wage Disclosure System

[Sejong=Asia Economy Reporter Moon Chaeseok] The Economic, Social and Labor Council and the Presidential Committee on Income-Led Growth have sparked a growing controversy by bringing the introduction of a 'solidarity wage policy' that lowers the wages of high-income earners into public discussion. The proposal to create a system that can cut the wages of high-salary workers regardless of their productivity and willingness is considered anti-market, and changing the negotiation system centered on company-specific labor unions is also pointed out as practically difficult.

Kim Yuseon, chairperson of the Income-Led Growth Special Committee, emphasized the responsibility of high-income earners as a condition for introducing the solidarity wage policy in her keynote speech at the forum. Chairperson Kim explained, "High-income earners such as CEOs should set wages commensurate with their social responsibility." However, she did not mention specific figures or methods for realizing or determining the intensity of 'social responsibility' or wage setting.

In addition to the downward adjustment of salaries for high-income earners such as CEOs, Chairperson Kim emphasized the need for ▲ super-company-level union negotiations instead of company-specific unions ▲ changing the wage increase system from a rate-based system to a fixed-amount system ▲ forming job-based wages at the super-company level for small and micro enterprises, non-regular workers, and indefinite-term contract workers ▲ and introducing appropriate wage systems and wage disclosure systems.

Super-company-level negotiations refer to a system where major negotiations such as collective bargaining are conducted from the start by grouping unions at the 'group level,' regardless of whether they are large or small companies or regular or non-regular unions. This can only be realized if some large company unions, often called 'aristocratic unions,' relinquish their vested interests. Professor Yoon Dongyeol of Konkuk University’s Department of Business Administration said, "The negotiation structure in the Korean labor market is such that large company union members represent workers who are not union members, so the first concern should be whether concessions on wage disparities can be drawn from large company unions." Former Labor Research Institute Director Choi Younggi diagnosed, "Large company unions such as Hyundai Motor are reluctant to negotiate with non-regular and subcontractor unions together with management."

Changing the 'rate-based system,' which favors high-income workers, to a 'fixed-amount system,' which favors low-income workers, is also not easy. For example, if a 'rate-based system' that increases wages by 3% annually is changed to a 'fixed-amount system' that raises wages by 100,000 won annually, there could be objections that workers receive the same amount regardless of individual productivity (performance), and questions about whether the 'value of 100,000 won' is appropriate compared to current wages and inflation rates. Since the seniority-based wage system, which pays more to workers with longer tenure, is widespread, it is also pointed out that forming job-based wages separately for small and micro enterprises and non-regular workers is unrealistic. If a wage disclosure system is introduced that mandates the disclosure of employment type, gender wage, working hours, and other labor information, unnecessary conflicts between labor demanding unreasonable wage increases and management could increase.

Above all, the idea that highly productive workers should lower their wages for the sake of lower-paid workers does not align with market logic. According to the Korea Federation of SMEs, assuming labor productivity is 100% in companies with 500 or more employees, it is only 13.9% in companies with fewer than 10 employees, 26.6% in companies with 10-49 employees, 33.7% in companies with 50-99 employees, and 47.7% in companies with 100-499 employees. If the government formally attempts to introduce a system that cuts wages for workers whose productivity is only one-tenth, resistance from high-income workers could be significant.

A business representative said, "Workers' wages should be determined in the market based on incentives such as the quality of labor provided and contribution to production, but if the wage system is uniformly set according to social consensus, the market could be distorted. Due to COVID-19, not only is the introduction of the solidarity wage system impossible, but it could also act as a factor that further freezes the employment market if introduced."

This content was produced with the assistance of AI translation services.