South Korea: Labor Unions Become a Bigger Headache?
Stratfor Summary
South Korea's two main umbrella labor unions said they have
overcome policy differences and agreed to cooperate. Unions
represent a powerful force in South Korea, and the first in a
series of strikes set to run through June is under way. Given
Korea's concerns over China's economy, high oil prices and
uncertainty over a U.S. interest rate hike, the new round of
general strikes backed by both key umbrella labor unions will
further dampen Korea's economic performance.
Analysis
The [South] Korean Confederation of Trade Unions (KCTU) and the
Federation of Korean Trade Unions (FKTU) announced May 28 that
they had overcome policy differences and were now prepared to
cooperate. The two umbrella labor organizations -- which
represent more than 1.5 million laborers in some 6,000 unions and
45 industrial federations -- have often disagreed on specific
policies and on cooperation in the tripartite talks among
government, business and labor.
The talk of cooperation will raise concerns in Seoul, because the
KCTU is beginning a series of strikes pressing for changes in the
five-day workweek and part-time labor regulations. More troubling
for Seoul is the timing; the strikes are set to come as South
Korea continues to face economic fallout from China's monetary
policies, rising oil prices and uncertainty over the potential
for interest rate hikes in the United States.
South Korean summers are often the time for labor strikes -- and
this summer looks like no exception. Already bus drivers are
striking, taxi drivers are ready to follow suit and hospital
workers are gearing up for strikes of their own. The main issues
center around disagreements over the implementation of the new
mandatory five-day workweek, which goes into effect July 1, and
the treatment of part-time or hourly laborers, issues that are
key to the <a href="Story.neo?storyId=228384">economic growth
plans</a> of President Roh Moo Hyun's government.
While labor unrest and powerful unions have been a drag on
foreign investment in South Korea in the past, this year their
impact will compound the problems already emerging, triggered by
concerns over China's economy and still-rising international oil
prices. South Korea's stock-and-bond markets recently saw the <a
href="Story.neo?storyId=232226">biggest 20-day withdrawal</a> of
international funds following the so-called <a
href="Story.neo?storyId=231819">"China Shock"</a>, related to
Beijing's attempts at a controlled cooling of the Chinese
economy.
Business investment in South Korea was down 2.5 percent year-on-
year in April, after recording a 7.7 percent year-on-year drop in
March, according to the National Statistics Office. In addition,
South Korea's wholesale and retail sectors noted year-on-year
growth for April of only 0.1 percent.
Concerns over a slowing in the economy have already triggered
responses from key government officials, including Roh, who
warned in a speech at Yonsei University on May 27 that continued
talk about a crisis could precipitate one -- by forcing the
government to make rapid and ill-chosen economic policy
decisions. Minister of Finance and Economy Lee Hun Jai said May
28 that South Korea was not in a crisis, although the economy was
still in recovery and needed time.
These words of comfort might fall on deaf ears in South Korea,
where the perception of economic problems runs much higher among
the general population than it does in official statements.
Unemployment, particularly for new graduates, remains high, and
credit card debt is rising to record levels again. Without
confidence from South Korea's consumers, and with both domestic
and foreign investors wary of uncertainties -- including renewed
labor unrest -- the outlook for an early recovery looks slim. With the shadow of another Chinese economic shock looming, the
South Korean government faces an uphill battle. |
