Friday, March 18, 2011

Korea’s Labor Force: Muscle Behind Economic Miracle (April 2010)

By Andrew Salmon

Economic pundits examining South Korea in summer 1953 had few positive signs to assess. The war had resolved nothing: The peninsula remained divided; and inter-Korean animosities were fiercer than ever. Much of the nation's urban area and national infrastructure was devastated. Moreover, most of the industry, and key natural resources ― minerals, precious metals, hydro-electric power ― lay in the North. The country was a basket case ― yet three decades later, was being lauded as an ``economic miracle.''

Post-war South Korea had only one significant resource: people. And they hardly looked formidable. Many 19th century Western observers considered Koreans corrupt, backward and lazy; many 20th century observers saw them as fractious and brutal. Yet the seeds to transform a nation of peasants into a nation of workers ― in 1960, workers in the agricultural, forestry and fishery sectors accounted for 63 percent of the labor force; by 2008, this had plunged to 7.2 percent ― were planted early in South Korea's history.

Educational Premium

The nation's first president, Rhee Syngman, enacted universal education. He was building on an existing cultural construct: Educational achievement has been revered by Koreans since at least the 15th century. For a nation as a poor as Korea, Rhee's investment was risky: As much as 19 percent of national budget was devoted to the project.

The system was based heavily on rote-learning, with particular emphasis on successfully inculcating the basics of numeracy and literacy (Korea boasts one of the lowest illiteracy rates on earth). But beyond classroom teaching per se, the culture implicit in the wider educational system helped incubate an effective labor force that was tailor-made for the manufacturing industry that would appear in the 1960s.

In Korean education, the end result ― i.e. achievement in examinations ― is more important than the learning process itself. For this reason, students are expected to study long ― by Western standards, ridiculous ― hours. Moreover, conformity, not individuality is demanded: team mentality dominates. Teachers enforce rules with strict discipline. All these factors would prove effective in forging a labor force that could read and count; was less focused on process than on outcome; was conditioned to working excessive hours; and was disciplined and responsive to orders.

Korean males were subject to another kind of training: national service. Military training further inculcated discipline, spiced with a fierce patriotism ― a force that could be leveraged by authority figures in all areas of life. Nothing was more sacred than working for the group, the company, the nation.

"In the 1960s and 1970s, we had a kind of military morale at work sites,'' said Choi Im-sik, manager of the Labor and Government Relations Team at the Federation of Korean Unions, or FKTU. "Labor obeyed without question.''

A government that prioritized export-led growth provided technical education that upgraded skills as the nation transitioned from light (textiles, wigs, dolls) to heavy (petrochemicals, electronics, construction) industry. In 1967, vocational training was introduced. Technical high schools, such as the Construction High School in Gimhae, South Gyeongsang Province, the Electronics High School in Busan and the Mechanical High School in Gimhae were established. Graduates particularly valued by industry were exempted military service; university departments set aside quotas for technical high school students. In 1976, official policy obliged employers to provide compulsory vocational training.

All for the Company

Unlike communist states, Korea ― which certainly benefited from a strong, Socialist-tinted dose of central planning ― used private, rather than public corporations as its economic growth engine. Companies leveraged their staff to the maximum.

Conglomerates ran courses for new hires that could best be described as indoctrination programs: military-type group training inculcated company spirit. Many companies, even small ones, had a paternalistic side. Teams, shifts and departments fostered close relationships, cemented by after-hours bonding. Firms sponsored in-house sports squads, and weekend excursions that often included games and team-building exercises.

Management was hands on. Department heads attended staffers' weddings and family funerals, even playing the role of match-makers. In the early days of economic growth at least, corporate leadership was personal and charismatic: Hyundai godfather Chung Ju-young was noted for wrestling with his workers. Bosses were known for getting their hands dirty. As CEO of Hyundai Construction, Lee Myung-bak, a typical workaholic, dismantled a bulldozer to see what made it tick.

These various factors engendered powerful loyalties. A 1996 report by global HR agency Humanbridge noted: "Korean employees are expected to dedicate themselves not only to their work, but also to the success of their company. While there is no guarantee of lifetime employment, Koreans generally do not approve of job-hopping.''

The end result was a workforce willing to sacrifice itself for the company. One example was exceptional working hours: Korea routinely topped international surveys (the nation currently has the longest working hours in the OECD). While Korean workers might lag behind those of more developed nations in productivity terms, willingness to work long and hard made up for it.

These fearsome hours ― which corroded quality of life, particularly family life ― did not go unrewarded. As members of an intensely ambitious society, workers sought extra income from overtime and bonuses. A 2007 study by scholars Lee Byung-nam and Rhee Yin-sog, examining manufacturing companies between 1972 and 1987, found that bonuses did, indeed, reflect increased output. "Even these days, Korean workers work hard,'' said Dr. Kang Choong-ho, spokesman for the FKTU. "They want to earn more.'' Indeed: With Korea having customarily been a producer-led, rather than a consumer-focused economy, living costs have always been high.

Dark Side

But there were other factors behind Korean workers' extraordinary output: Growth-obsessed authoritarian governments were untrammeled by such niceties as labor rights or the need to fund social welfare. "From the 1960s to the 1980s, Korean economic growth was the result of the sacrifices of the workers,'' said Kang.

Labor consciousness rose in 1970 after the self-immolation of Chon Tae-il in protest at the sweatshop conditions endured by textile workers (SEE BOX) but the soil for union formation remained stony for another 17 years. For one thing, in the aftermath of the war, any left-leaning organization was looked upon with suspicion. In a 2007 study, researcher Hwang Suk-man found that, absent an environment in which unions could be openly organized, many union leaders based their leadership on personal charisma; when they were jailed or otherwise removed, unions imploded. Moreover, government cynically used the gender divide, pitting males against activist female workers in the 1970s. A 1980 Labor Law revision banned formation of sectoral unions, limiting unions to individual companies.

Historical suppression of unions detonated explosive events in summer 1987, when Koreans won democracy after almost a decade of struggle. Union membership soared. So did industrial disputes: between July and September, over 3,000 conflicts occurred, exceeding the total number in the previous two decades. Some were spectacular: Seoul deployed helicopters, landing craft and more riot policemen to break up a strike at Hyundai than the British government had used soldiers to recapture the Falkland Islands. Wages soared across industries. The early-mid 1990s were the heyday of union activism; a general strike in 1997 forced the Kim Young-sam administration to back down from changes to labor laws. But in 1998, with the specter of mass layoffs hovering due to the Asian economic crisis, a Tripartite Commission, formed of representatives of government, management and labor was formed to mediate industrial disputes.

Korea's Labor Force Today

An iconic image of today's Korea is massed ranks of head-banded unionists, waving banners, thrusting fists in the air and roaring in unison: ironically, militaristic organization, so valuable to management in the past, is now utilized by labor. Two national umbrella unions remain active, and continue to use the language and paraphernalia of struggle.

Such high-profile activism masks that the fact that just 10.5 percent of the workforce is unionized, and Korea's top company, Samsung, lacks a union. While foreign firms routinely beg Seoul to "increase labor market flexibility'' (i.e., ease dismissal rules) over 50 percent of the workforce, the FKTU notes, is either part time or temporary. Moreover, as services industries expand, union organization becomes more difficult. (One exception to this truism is Korea's finance sector, which has unusually strong unions by global standards.)

Korean workforce vulnerabilities include increasing wage levels and poor productivity, but retain strengths against counterparts in, for example, China, Southeast Asia and Eastern Europe. Dr. Lee Jong-il, an HR specialist at Samsung Economic Research Institute lists them: "Creative capacity, high global literacy, high attainments in scholarship ― more than 80% of workers have university degrees ― and a high IT capacity.'' Koreans agonize that the education system that successfully supported the metal-bashing era is inappropriate for a knowledge-based economy, but hundreds of thousands of Koreans studying abroad bring home new skills and new concepts.

The rise of Korea from war's ashes is not exclusively due to labor. Vision; efficient central planning; authoritarian governments that prioritized economic growth over political development; generous post-war U.S. aid, trade and technology transfer terms; imports of industrial consultants from Europe, Japan and the U.S.; all contributed to Korea's economic ascent.

But historically, labor's role, has been underplayed. None of the factors above would have taken effect without the efforts ― and sacrifices ― of the workforce; Korea's labor was the muscle that built the miracle. ◦

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