[Opinion] It’s Time for Entrenched Unions to Step Aside for the Labor Community

“Open recruitment” has, before we knew it, become a term of the past. Large corporations no longer hire new employees the way they once did. The same is true of public institutions: hiring there is also declining as part of efforts to reduce bloated government spending. The government touts seemingly respectable employment statistics as evidence of job creation, but no one can fail to feel that the high-quality jobs young people aim for are shrinking both quantitatively and qualitatively. Why is it becoming ever harder to get a good job?

What makes the barriers to employment so thick is the low degree of labor market flexibility in Korea. In other words, it is a market where hiring and firing are highly rigid. According to one survey, Korea ranked 35th—near the bottom of the OECD—in labor market flexibility, while ranking 6th in the strictness of dismissal regulations for regular workers. Regular workers are thus protected far more strongly than non-regular workers. Companies inevitably come to view regular employees as “expensive workers who are hard to fire once hired,” and this leads directly to a decline in new hiring. We should note that difficulty in firing means, to the same extent, difficulty in hiring.

One of the biggest factors believed to reduce labor flexibility is labor unions. For young people who choose employment over the civil service exam, the top destinations are large corporations and public enterprises, but these are precisely the places where unions are most firmly established and active. Rather than enterprise-level unions, industry-wide unions took root early, grew into massive power blocs, and exert strong influence over entire industries at the central level in order to improve the treatment they receive. Of course, improving working conditions and raising wages are the essential purpose and role of unions.

The problem is that unions have become excessively powerful with institutional backing. In Korea, it is institutionally permitted for unions to go on strike and occupy workplaces, but companies are prohibited from hiring replacement workers for striking union members. For this reason, Korea’s average annual number of working days lost far exceeds that of major manufacturing powers such as the United States, Japan, Germany, and the United Kingdom. None of these countries completely blocks replacement labor. This is why Korea’s labor market is often seen as a field tilted unusually in favor of labor compared with global standards.

Yet indiscriminate union strike activity contains a fundamental contradiction. The more workers devote themselves to hostile strike action for wage increases, the more productivity—the primary determinant of wages—declines. The stronger and larger unions become, the more inefficiency rises in the production process, and this works in the long run to worsen workers’ treatment. From this perspective, unions’ excessive demands can be classified as collective selfishness that directly rejects the principles of competition and the market. The anachronistic demand of “hereditary employment” has been accepted through labor-management agreements at dozens of companies.

The positive functions of unions have today reached their limit. In the United States, union membership rates have continued to fall noticeably even under the pro-union Biden administration, and this recently became an issue. One explanation offered was the perception that the benefits unions provide—better welfare and higher wages—are worth less than the union dues members pay. Korea is no different. Over the past several years, the minimum wage has risen steeply, and unlike in the past, when workers had to organize because they were too weak to stand up to management, individuals today possess sufficient bargaining power even without the protective shield of a union.

Another reason people can no longer sympathize with unions is corruption and degeneration. Opaque accounting has been repeatedly criticized as “black box accounting,” and corruption cases involving routine misconduct by union officials are highlighted with some frequency. In the transportation industry, excessive illegal acts—such as cutting the brake hoses of non-union drivers’ vehicles for refusing to join a strike, or firing steel balls at vehicles in operation—are still carried out in an outdated manner under the old pretext of labor struggle. Distrust of unions is also fueled by the fact that they are positioned not on the front lines of labor in vulnerable working environments, but on the front lines of political struggle.

It is not as though previous governments made no attempts at labor reform to improve this inefficient market structure. But at the stage of social consensus, active resistance from the two major labor federations prevented further progress. The political sphere was unable to overcome unions armed with organized votes, strikes, and media campaigns. Yet in many surveys, negative perceptions of unions have already surpassed anti-big-business sentiment, and the government’s recent hardline response to illegal strikes by militant unions was met with public approval reflected in rising support ratings. In other words, the public is growing resentful of unions’ collectively selfish demands.

We need a labor market in which neither firms nor workers remain stagnant, and in which labor mobility is freer. At a time when industrial structures and the labor demanded by companies are constantly changing, unions’ anti-competitive pursuit of vested interests while still stuck in the past is something our society must prioritize eradicating in order to build a normal labor market.

Dongjun Na, Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [자유발언대] 기득권 노조는 노동계 위해 퇴장해야 할 때

Author: Dong-jun Na

Date: 2023-03-14

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=6&idx=25458