Korea’s economic challenges are many, but perhaps the most pressing is the relationship between the current government and labour unions. A change of mindset is needed if the country is to move beyond the structural challenges seen as potentially existential. 

It’s a blazing hot summer’s day, the air is thick, and catchy pop songs ripple through the crowded streets of downtown Seoul. In an unassuming office, I came to interview a key economic advisor under multiple governments about the challenges facing the Korean economy.

We discussed the deepening concentration of family-owned conglomerates (known as Chaebol), the decline of Small to Medium Enterprises, and the challenges of expanding social welfare. Then, I turned to my final question: the role of organised labour in producing positive economic outcomes.

The tone noticeably changed as an uncomfortable silence filled the room. He then, as politely as he could, reached for his pen and scratched out the question listed in my notes. I got the picture and wrapped-up the interview. I offered my profuse thanks for his time, returning to the heat waiting for me outside of the airconditioned room.

After three months of similar discussions, the reaction was not surprising. Under the administration of President Yoon Suk-Yeol, organised labour has reemerged as a highly contentious issue.

Storm clouds were noticeable as early as his inauguration in May 2022. Criticising his centre-left predecessor, Yoon asserted that national economic success hinged on business empowerment and the discipline of “vested interest cartels.”  Overlooking the Chaebol, however, the main cartel was attributed to labour unions which have historically been a staunch bulwark to conservative government policies.

Since then, Yoon has engaged in a significant effort to disrupt the power of labour organisations which he described as a “deep rooted evil.” This included mass-investigations resulting in the arrests of 2,863 unionists on broad indictments ranging from racketeering to business obstruction. In January, police also raided the office of peak labour organisations under questionable accusations of colluding with North Korea.

Yet the most dramatic example was December 2022 when thousands of truck drivers took to the streets to demand a system of minimum pay and stable work conditions. The movement was quashed by the administration through an unprecedented “back-to-work” decree, likening the strike to be on par with North Korea’s nuclear threat.

Politically, Yoon’s hawkish position on unions has proven popular among his party’s older conservative base. It also builds upon a political image of a leader determined to revive the economy by shielding businesses from burdensome union demands. This has added well-needed momentum to a presidency troubled by low domestic popularity caused by contentious foreign policy decisions and a series of mishaps.

Societally, unions have also received declining public support. With low levels of stable employment and high levels of temporary work, unionisation has proven a difficult task. In increasingly challenging economic conditions, some have come to see the stop-work strikes initiated by unionists – who often have stable jobs – as “aristocratic” or narrow minded.

Yet more than a political gambit, Yoon’s approach also reflects a self-evident truth about his own view of the economy. Steeply rooted in a modern form of “trickle-down economics,” the administration has staked its legacy on achieving growth through three interrelated pursuits.

The first is introducing large-scale tax cuts and reducing regulatory constraints for big-business. The second is slashing public expenditure by reducing social welfare, recently seen with the closure of all foreign worker welfare centres across the country. The third is increasing productivity by removing the assumed “rent-seeking” behaviour of unions and business-stifling effects of labour protections.

Yoon is known for his deep love of the book “Freedom to Choose” by Milton Friedman, which he says left the greatest influence on him since birth. Friedman’s texts are seen as the intellectual bedrock to Raegan and Thatcherite economics which prized unfettered free-markets and denounced organised labour as a factor to be avoided – or suppressed – at all costs.

Far from a political gambit then, Yoon’s union-averse behaviour stems from his own understanding of how ideal economies are supposed to work. This stands in stark contrast to the United States and even Japan which have long-since abandoned such approaches, and have taken more pro-labour orientations towards their plans for economic reform.

The Consequences

Korea faces considerable difficulties in its post-pandemic economic recovery. A heavy reliance on export-oriented conglomerates – particularly in semiconductors and intermediate goods – is now being challenged by an excess in global supplies and dwindling Chinese imports. Meanwhile, tight monetary policy and high household debt has left fewer conventional policy tools to juice consumption-led economic activity.

A positive upshot to Yoon’s anti-union campaign may therefore be a temporary boost to domestic business sentiment and even some short-term savings for companies struggling with economic headwinds. Yet such an approach also has considerably negative consequences – both in the short and long term.

First, in the short term, it has led to a complete breakdown in policy cooperation between the government and labour representatives. This was exemplified by the recent withdrawal of the Federation of Korean Trade Unions — one of the nation’s two major umbrella unions — from presidential policy discussions. Consequently, Yoon’s ability to effectively implement and gain support for his labour market reforms has now been slowed.

Second is the escalation of tensions between workers and management. Yoon’s heated rhetoric and strong actions have set a national tone which is echoed in workplaces across the country. This has manifested in extreme protest actions and counteractions, including a construction union worker’s self-immolation and a manager at a Hyundai Motor supplier deliberately ramming his car into union workers.

Ironically, for an administration keen to encourage foreign investment, such militancy on both sides may threaten to reduce Korea’s attractiveness as a business destination.

Yet the long term risks are even greater. Today, Korea faces a range of structural issues which may prove existential. The birth rate has reached its lowest point in history just as its population is experiencing profound ageing. And, despite government efforts to reverse the ongoing trend, it is experiencing an unprecedently sharp brain-drain of its highly-educated workforce.

While the roots of these long-term issues are as deep as they are complex, one can point to two dominant factors. The first is ultra-competitive work environments defined by long-working hours and insecure jobs. The second is a historically weak social safety net which fails to adequately support working families, job-seekers, or elderly retirees.

In such an environment, the possibility of raising a family has proved out of reach for many, leading younger Koreans to either avoid having children or simply leave the country altogether.

In response, the government has introduced a host of policies to reverse the tide such as greater financial incentives for childbirth. Yet the most crucial point is that all of these issues relate ultimately to the conditions of labour.

Countless academic studies have shown that unions, when treated as an equal, act as a partner for management in achieving higher workplace productivity and wellbeing. Countries which have a cooperative relationship with unions – who often act as the de facto voice of the working class – have also demonstrated better economic and political outcomes on a wide range of metrics.

If there is therefore one thing I learned from my time in Korea talking to a range of economic experts, labour leaders, and civil society members, it is this: if the government wishes to seriously tackle its economic challenges, a change of mindset must be made.

Despite their imperfections, unions are not the vanguards of protests and neither are they a bulwark to business. Rather, they are the central channel which working people organise and articulate their frustrations and demands. It’s now the time to start listening, before its too late.

Chris Khatouki is a PhD Candidate at the University of New South Wales and a 2023 Euan Crone Asia Awareness Scholarship Recipient. He was recently a Visiting Scholar at the Ewha Graduate School of International Studies. He is also a Korea Foundation Fellow and was recognised as an Emerging Policy Specialist by the National Committee on American Foreign Policy.