June 18, 2017 9:00 am JST

Moon seeking right balance with South Korea's business elite

Two sides looking to bridge differences over contract, part-time work

SOTARO SUZUKI, Nikkei staff writer

South Korean President Moon Jae-in, center.

SEOUL -- Torn between a promise to reform South Korea's conglomerates and a need for their cooperation to run the country, South Korean President Moon Jae-in is still trying to strike the right tone with the business community a month into office.

Trouble began brewing last month when Kim Yong-vae, the vice chair of the Korea Employers Federation, criticized Moon's plan to end all contract work in the public sector. "Even the private sector has been overwhelmed with demands to make all irregular workers permanent employees," Kim lamented.

Moon issued an unusually sharp rebuke through a spokesperson the next day, arguing that the KEF had polarized the society through the use of contract workers, and that they should engage in serious self-reflection.

South Korean companies increasingly turned to temporary contracts after the Asian currency crisis in 1997. One in three workers are now said to work on a contract basis or part-time, earning on average two-thirds of what their full-time, permanent peers make. Kim's comments seemed to run counter to Moon's campaign to reduce inequality.

Hiding concerns

Former President Park Geun-hye was often criticized as aloof. Learning from her mistakes, Moon is making significant efforts to communicate his position. He has encouraged an open debate at the presidential office as well, stressing that everybody has a responsibility to ask questions.

But the harsh comments on May 26 contrasted with his usually friendly attitude. The KEF quickly explained that Kim was voicing his personal opinion, and canceled the release of a booklet that defended the use of irregular workers.

Corporations have kept silent on any misgivings they may have about Moon. If anything, they are vying for his approval by announcing new policies that reflect the government's priorities. SK Broadband on May 23 said it will directly employ about 5,200 current subcontractors through a new subsidiary. Of the 103 independent companies that do internet installation for SK Broadband, about 80% are taking part in this plan.

But frustration is bubbling below the surface. "We ourselves have almost no irregular workers," an executive at a leading manufacturer said. "The problem is that our partners' employees are considered to be our contractors."

According to local news outlet Money Today, quarterly reports show that 4% of the workforce at South Korea's four major conglomerates -- Samsung Group, Hyundai Motor Group, SK Group and LG Group -- are irregular. But a research institute tied to labor unions puts the figure at 30%, because it adds all workers at their suppliers to the tally as well.

Forcing companies to directly employ such workers "will likely only reduce the number of overall jobs," a labor expert said.

Finding a balance

The government also realizes that it needs cooperation from the business sector. The heads of the four conglomerates, as well as other South Korean giants like steelmaker Posco, are expected to accompany Moon when he meets with U.S. President Donald Trump at the end of June.

Moon still does not officially have a foreign minister. He will be forced to discuss difficult topics like North Korea's nuclear program, the deployment of the Terminal High Altitude Area Defense missile shield, and renegotiation of a bilateral free trade agreement without the necessary support in place.

But South Korean corporations could help his agenda. Samsung Electronics and LG Electronics announced they will build new plants in the U.S., appeasing Trump by creating new American jobs.

Seoul also seems to be changing tack. The KEF will be taking part in a committee to advance Moon's signature employment plan.

 

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