Korea’s efforts to break labor market duality extends to petrochemicals

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Despite the slower-than-anticipated progress in labor reform, the South Korean government is taking steps forward in terms of labor-management cooperation as it expands measures to improve the two-tier labor market structure to the petrochemical industry from shipyards.

The Ministry of Employment and Labor, alongside Lotte Chemical Corp., hosted an event to promote win-win labor management in the petrochemical industry in Seoul on Tuesday, according to government and industry sources.

Speaking during the event, Minister Lee Jung-sik emphasized the importance of voluntary labor-management cooperation, saying, “the labor market duality issues will be resolved when voluntary cooperation between labor and management creates a labor-management cooperative ecosystem.” He added that measures that are solely focused on individual issues, such as increasing the minimum wage and expanding the employment of regular workers, could potentially lead to confusion within industries.

The joint event marks the first instance of a win-win labor-management agreement, initially introduced in the shipbuilding industry, expanding to other sectors. The petrochemical industry has been known for its high ratio of subcontractors and a notorious dual structure with significant disparities in wages and working conditions among labor tiers.

Lotte Chemical plans to develop measures aimed at improving the working conditions of subcontractor employees, enhancing subcontractors’ technological competitiveness, establishing fair-trade practices, and promoting cooperation with small plastic companies, among other initiatives. Partner companies will also strive to improve their employees’ working conditions and productivity. The government’s role will be to provide active policy support for the successful implementation of the industry-identified tasks.

Labor market duality refers to a tiered labor market structure, characterized by significant qualitative differences in working conditions, such as wages and employment stability, between large and small businesses and between permanent and contract workers. The government announced measures to address this duality issue in shipyards in October 2022, following a Daewoo Shipbuilding & Marine Engineering subcontractor union strike in July that year. In line with these efforts, major shipbuilders and subcontractors signed a cooperation agreement in February 2023.

The government is also accelerating efforts to develop measures for resolving duality issues that can be applied across various industrial sectors, with the first draft scheduled for release as early as October.