Korea to expand win-win wage system to auto, chip industries

[Image source: Gettyimagesbank]

The win-win package support program, which has been applied in the shipbuilding industry to address wage gaps between client and supplier companies, is set to expand to encompass other key industry sectors in South Korea, including the automotive, semiconductor, and steel industries. The expansion is part of the Yoon Suk Yeol administration’s labor reform efforts to improve the dual wage structure of the labor market.

Following the government’s recent move to eliminate the vested interest of powerful labor unions in the first half of this year, it plans to accelerate its labor market reform in the second half.

According to sources on Sunday, the Mutually Prosperous Wage Committee is planning to draft recommendations to improve the dual structure of the labor market by the end of this month.

The target industries for the program are expected to include those where client companies have relatively significant influence on suppliers, such as the automotive and semiconductor sectors, as well as the steel industry. The win-win package includes proper payment of construction costs by client companies, closing the wage gap between client and supplier companies, promoting recruitment, and supporting technology exchange. This is similar to the wage and welfare gap reduction currently applied to the shipbuilding industry.

Additionally, plans are in motion to apply these improvements to older industrial complexes such as Banwol and Sihwa complexes. The aim is to gradually address the entrenched wage gap in labor markets not only across different industries but also within regional industrial complexes.

The decision to expand the scope of the win-win package support is a response to the fact that wage disparities between large, medium, and small companies are as high as 1.86 times, which indicates that Korea’s dual labor market structure remains one of the worst among OECD member countries.

The Ministry of Employment and Labor plans to announce the win-win wage expansion roadmap, which encompasses key tasks related to wage system reform, including the dual structure improvement plan, by the end of the year.

The committee responsible for devising the improvement plan was established in February and serves as a social discussion body that oversees wage-related issues, not just limited to wage systems.

It is co-chaired by Yee Jae-yeol, a sociology professor at Seoul National University, and Employment and Labor Minister Lee Jung-sik. Professor Lee emphasized that resolving the dual structure that has formed in different industries requires substantial efforts from individual companies and labor unions. He also stressed the need for clearer industry and regional discussions and breaking down collusion between labor and management to foster a common understanding.