Summer labor strife looms in South Korea

Summer labor strife looms

Policymakers should revisit 'yellow envelope law,' engage both labor, management

The labor rights of Korea's unionized workers have, over decades of growth, been the subject of tug-of-wars with management. The so-called "summer labor struggles" — as most companies begin wage negotiations around this time of the year — have historically been notably dynamic. While sometimes tenuous or volatile, management and labor have generally been able to reach a workable balance on Korea's path to becoming an export powerhouse.

This summer, labor-management relations face new sources of strife, as more unionized workers ask companies to share the excess profit generated by the country's artificial intelligence (AI) and semiconductor sectors.

Recent labor negotiations have also been attributed in part to the "yellow envelope law," which took effect in March. The law amended Korea's Trade Union and Labor Relations Adjustment Act to guarantee the bargaining rights of subcontracted workers.

Calls for companies to share excess profits with workers and the expected rise of negotiations between subcontractors and principal employers are not only major labor hurdles but are also social issues that Korea must tackle in this new era. A serious public debate to forge a wise, sustainable consensus between management and labor could offer insights on how the government can alleviate the "fear of missing out" mindset among Koreans. The challenge will be how to convince people and companies, who are grappling with uncertainties from the AI boom.

The bonus payments that top chipmakers Samsung Electronics and SK hynix agreed to provide to workers have invariably spurred employees at other companies to make similar requests. Unionized workers at Hyundai Motor and Kia are asking that 30 percent of net profit be paid out to employees as performance bonuses. Such labor demands are not limited to the traditionally strong manufacturing area but are also spreading to platform firms. The labor union at Kakao, the nation's most-used messenger service, staged a walkout Monday, where nearly half of the 5,000 union members at the company and its affiliates, including Kakao Pay and Kakao Enterprise, participated. The union is asking for performance bonuses equivalent to about 13 to 14 percent of the company's operating profit.

Wisely addressing the call for distribution of the business profits will be critical to the Korean economy. The workers' rights -- to organize, to collective bargaining and to collective action -- guaranteed under the Constitution must be upheld. Yet both sides must factor in economic realities or the rebounding Korean economy — built on a semiconductor rally due to increased demand for AI – can easily be made vulnerable. Korean companies, tailed by China while facing stiff tariff hurdles from the United States, compete in a volatile and uncertain landscape as they face stiff competition in the AI era.

In addition, with the implementation of the yellow envelope law, larger umbrella labor unions predict that more subcontracted workers will request direct negotiations with parent companies. Since the law took effect, more subcontracted employees in sectors ranging from carmaking to plant engineering and construction are moving toward direct negotiations with principal employers.

Invariably, calls for direct negotiations and payouts from excess profits will spread more widely.