Social inequality worsening in South Korea

Social inequality worsening in South Korea

Ben McGrath's great article reminds us about Korea's a particularly cruel austerity measure for Korean workers called "job sharing" that, as it turns out, has done nothing to relieve unemployment problems here. It's not hurting corporate profits, though. Check it out.

Job sharing can be advantageous for employees. It's not hard to think of the reasons for it working well for certain kinds of workers and the challenges it presents a employers and employees. However, job sharing is not good for Korean workers. It's used here to produce increased profit in corporations during a weak economic cycle. Employee wages do not increase, employment apparently increases, productivity increases, profits increase. It's a way to make employees bear the burden of austerity on behalf of their employers who bear little if any at all.

Like American workers, South Korean workers have been forced to take on more and more debt due to declining wages. According to figures from the National Tax Service last August, per capita earnings for the lowest 20 percent of workers liable for general income tax decreased by 35 percent between 1999 and 2009.

In no small part, this decline in wages came from casualisation of employment. The number of irregular workers—workers without contracts—has risen sharply since 1998. Today, more than half of the workforce, or 17 million people, are considered irregular, earning an average of just 1.35 million won a month ($1,145), or 57 percent of the regular average wage. Irregular workers are also subjected to workplace discrimination and firing at the whim of employers.

The chief architect of this “labour flexibility” was Democrat President Kim Dae-jung, elected in 1998, who imposed the conditions set by the International Monetary Fund for a $10 billion bailout in the midst of the 1997-98 Asian financial crisis.

Kim’s successor, Roh Moo-hyun, continued to develop the Democratic Party’s anti-working class policy, introducing the falsely named Irregular Worker Protection Act in 2007. Employers were required to offer contracts to workers who remained for two years. However, companies exploited loopholes that allowed them to fire their irregular workers before the completion of their two years. After Lee came to power in 2008, he maintained the loopholes.

The result has been a rapid expansion of cheap labour. International Labour Organisation statistics show that workers earning two-thirds less than median wage comprise 25.6 percent of the workforce, compared to 24.8 percent in the US and 15 percent in Japan.

The so-called “poor class”—defined by the Organisation for Economic Cooperation and Development as households earning less than 50 percent of the median income—increased to 3.52 million or over 20 percent of the total in 2009, double the OECD average of 10.6 percent. The so-called middle classes, earning 50-150 percent of the median income, declined from 60.4 percent in 2003 to 55.5 percent in 2009, according to Statistics Korea.

By sharp contrast, the top corporate executives—including President Lee, a former Hyundai CEO—have made extraordinary fortunes. The 2011 list of the 40 richest individuals in South Korea saw a record of 21 US dollar billionaires, up from 11 in 2010 and 5 in 2009. Last year, they added more than $20 billion to their collective wealth, now worth $65.6 billion.

Samsung’s Lee Kun-hee is No.1, with net wealth of $9.3 billion, ahead of Hyundai Motor’s Chung Mong-koo, whose fortune jumped 80 percent to $7.4 billion last year. That was not the most dramatic rise. Nexon online gaming owner Kim Jung-ju leapt 260 percent to $2.06 billion, while Mirae Asset Management Group’s Park Hyeon-joo tripled his worth to $1.5 billion.

Sections of the ruling elite are warning about the explosive consequences of this sharp polarisation between the powerful corporate elite and millions of poorly-paid workers. Former Premier Chung Un-chan warned in July that the gap between rich and poor had reached such a “grave level” that there was a “possibility of our society collapsing.” This was “a more serious matter than relations with North Korea,” he said.