Protests over merit-based wage system

Bank workers taking part in a rally during their general strike against a performance-based pay system in Seoul, South Korea, on Sept 23, 2016.
Bank workers taking part in a rally during their general strike against a performance-based pay system in Seoul, South Korea, on Sept 23, 2016. PHOTO: REUTERS

Thousands of South Koreans go on strike; they want to stick to seniority-based scheme

In recent weeks, thousands of bank employees have gone on strike, followed by healthcare professionals and rail and subway workers.

Their united cry: "No" to a performance-based wage system.

The South Korean government has been pushing for the public sector to replace its seniority-based salary scheme with a merit-based one, as part of broader labour reforms to boost productivity and revitalise the sluggish economy.

But the plan is now facing a backlash as labour unions started nation-wide protests two weeks ago, with one demonstration drawing 18,000 finance sector employees.

Even as private companies switched to a Westernised merit-based pay system, civil servants and employees of state-owned institutions continued to enjoy an "iron rice bowl" and a salary scheme that pays more with age, regardless of work performance.

Experts say this system has bred complacency at work and is the reason South Korea's labour market efficiency ranks so low by global standards. In the latest Global Competitiveness Index released by the World Economic Forum, South Korea ranked 26th out of 140 countries. While the country scored well in macroeconomic environment and infrastructure, it was ranked 121st in labour market flexibility, 132nd for cooperation in labour-employer relations, and 115th in hiring and firing practices.

With South Korea's growth stagnating at around 2 per cent, implementing economic reforms to eliminate inefficiency and boost the economy has become "inevitable", said economics professor Kim Seong Hoon from Singapore Management University.


  • Rail and subway workers on strike in Seoul last month and about 7,500 rail workers remain on strike. PHOTO: EUROPEAN PRESSPHOTO AGENCY


    Who's involved: Employees of state-owned banks, public finance institutions

    When: Sept 23

    What they did: About 18,000 employees from banks and other public finance institutions gathered at the Seoul World Cup Stadium for a one-day rally organised by the Korean Financial Industry Union.


    Who's involved: Hospital workers

    When: Sept 27-29

    What they did: About 400 medical workers from Seoul National University Hospital went on strike on Sept 27. Thousands more from other hospitals walked out on Sept 28 as part of a one-day rally organised by the Korean Health and Medical Workers' Union. Partial strikes lasted till Sept 29.


    Who's involved: Rail and subway workers

    When: From Sept 22, still ongoing

    What they did: On Sept 22, more than 2,000 members of the Federation of Korean Public Industry Trade Union gathered in Seoul to protest. Five days later, over 4,500 rail and subway workers went on strike. Most subway workers returned to work on Sept 30, after the union struck a deal with their employers. About 7,500 rail workers remain on strike.

    Chang May Choon

But noting the protests, he said the process would require "smooth negotiation" among the government, employers and employees. "It will be an uphill battle but it's a battle we cannot afford to avoid," added Prof Kim.

The government has been exerting pressure on 120 public institutions to switch to a performance-based salary scheme by the end of this year. Only about half have done so to date.

Those which fail to comply risk getting their 2017 budget frozen, but that has not stopped unions from opposing the scheme. They have vowed all-out strikes if the government does not scrap its plan, insisting it will encourage unnecessary competition at the workplace, lower public service standards, and pave the way for "easy dismissals".

Despite initial fears that the walkouts could paralyse banking, hospital and transport services, turnout was lower than expected. Enough temporary workers were deployed to minimise public inconvenience.

There are nine major state- owned financial institutions in South Korea, including two of the country's eight biggest banks - Korea Development Bank and Industrial Bank of Korea. The country's main rail and subway operators are also state-owned. Most hospitals are private, except the Seoul National University Hospital.

The Ministry of Employment and Labour has warned it will take a stern stance against "unlawful strikes", and reiterated that it will push ahead with much-needed labour reforms.

However, questions remain over the fairness of performance evaluations. There also appears to be a lack of trust in senior management to create a transparent performance appraisal system.

Both concerns are "understandable", noted labour economics expert Ahn Tae Hyun from Sogang University. "In general, the level of trust in Korea is relatively low," he said, citing rampant corruption which the government is trying to eliminate with an anti-graft Bill that went into effect last week.

More strikes and rallies are being planned this month and next month, including a large-scale rally in Seoul on Nov 19.

Chung-Ang University's sociology professor Lee Byoung Hoon, who specialises in labour relations, said the government can turn the situation around by engaging in talks with the unions.

He said: "The key is in the hands of the government, but the govern- ment's position is determined by the President's position, and she (Ms Park Geun Hye) is very strict and tough against unions. My judgment is that the situation cannot be resolved easily and is getting worse."

A version of this article appeared in the print edition of The Straits Times on October 07, 2016, with the headline 'Protests over merit-based wage system'. Print Edition | Subscribe