Workers’ Gains May Affect Korea’s Low-Wage Advantage

Dramatic things are happening in South Korea that could have a direct economic impact on American workers and companies.

Most exciting were the beginnings of a political revolution last June, followed a few weeks later by an explosion of more than 3,200 wildcat strikes, factory sit-ins and massive street demonstrations of workers that marked the start of an economic revolution.

These events, remember, are taking place amid South Korea’s “economic miracle,” which has raised the per-capita gross national product there from $87 in 1972 to $2,296 last year.

Americans who pay attention to such things cheered the political changes since they may well mean the end of South Korea’s uninterrupted history of dictatorial repression. But, to many of us on this side of the Pacific, that is only a welcome abstraction. Less abstract is the potentially direct economic impact on this country.

U.S. workers may not have to continue competing indefinitely for jobs against semi-skilled--and even many skilled--Koreans earning about $1.50 to $2 an hour and who still work between 55 to 60 hours a week.

Many lesser-skilled Koreans, especially in textiles, actually work 12 hours a day, seven days a week for as little as $125 a month. They, too, make products in competition with goods made by American workers.

Low wages are the only competitive advantage South Korean firms have over U.S. companies. Comparatively, the Korean workers generally are no more efficient, their technology no more advanced and their managerial skills no greater.

Despite wage gains coming from the strikes, the wage gap between U.S. and Korean workers is still so wide that more and more American companies, including giants such as Ford, Chrysler and General Motors, are continuing to move to South Korea or to form partnerships with Korean firms to reap profits from the cheap labor there.

Just last week, for example, the Daewoo Group and its partner, GM, announced that they are going to expand small car production in South Korea for export to the United States.

The planned new Korean plant is another blow to American auto workers, but it demonstrates the abiding faith that GM and Daewoo, one of the strike targets in July, have in the continued availability of low-wage Korean workers.

Wages alone for skilled machinists in this country, for example, average between $14 and $16 an hour. South Korean machinists were making $2 an hour before the summer’s strikes, including bonuses of about 300% a year. Now, with the increases they have just won, they get $2.40.

The worker’s revolution there may, however, deter some U.S. companies from moving to Korea to slash their labor costs. After all, they want really cheap labor, and who knows what those Korean workers might do next year.

Also, the recent strikes brought about changes in the relationships among workers, management and government that may, in the long run, make South Korea a less attractive base for runaway American companies than it is now.

Korean workers did win hefty wage increases--about 20%--with their fairly brief strikes. But even if they continue to make gains, it is going be many years before low-paid Korean labor is not the sharpest weapon that Korean companies wield in international competition.

More important than the immediate economic gains the workers won, though, is the fact that, for the first time in Korean history, the strikers turned unions that have been controlled by government and companies into organizations that so far are relatively unfettered by the traditional masters. Even Korean corporate management executives say that, while they don’t like what has happened, the unions are now apparently ready to challenge management in a quest for a better life for Korean workers.

Surprisingly, government and industry leaders are at least saying they aren’t distressed by the massive labor upheaval that certainly seems to have drastically changed relations between Korean workers and employers.

Jung Hyun Kwak, president of the Korea Society for the Advancement of Machine Industry says, yes, there were substantive changes as a result of the workers’ revolt. But he is optimistic that his country’s economy will continue to flourish, Kwak said last week while in Los Angeles as head of a Korean buying mission to the United States.

The twin Korean revolutions were inextricably linked. Without the political changes, the labor revolt would not have occured.

Myrick Hatch, expert on South Korea for Scudder, Stevens & Clark in its New York offices, says that that nation’s one-party government was so shaken by the political upheaval that it did not dare to harshly crush the recent strikes at the request of the companies as it has automatically done over the past three decades.

“The incumbents are worried about further antagonizing workers before the promised elections,” Hatch said.

Neither the labor nor the political situations in South Korea have been resolved yet, so the impact of the drastic changes on this country remains uncertain.

Many Korean union leaders are inexperienced. Some of the few independent ones with leadership experience have been jailed as ultra-leftists or Communists. Few, with or without leadership experience, have ever had any chance to conduct the difficult business of negotiating contracts.

But a new system is being put into place in South Korea. If it continues, and there is no bloody counter-revolution to smash it, multinational corporations in the future may not so easily use low-wage Korean workers as weapons to force down the wages and benefits of American workers.

Displaced Workers Take the Initiative in Texas

When workers take over ownership of a company, they usually suffer some economic pains, at least initially, and some former employees of a now-closed Levi Strauss plant in Tyler, Tex., are no exceptions.

But they think their future is bright enough to celebrate the official opening Oct. 10 of another apparel plant they have bought to replace the Levi Strauss facility.

The workers had to take a pay cut of 12.5% and some other losses, and each one also had to invest $1,000 in the new company, Colt Enterprises. They expect to begin making a profit within a year.

Helping to celebrate the creation of about 500 jobs to replace those lost when the Levi Strauss plant closed will be Jack Sheinkman, president of the Amalgamated Clothing and Textile Workers Union, which represented the workers at their old jobs and helped them fund the buyout of the Levi Strauss operation.

In addition to the union’s help, the Levi Strauss company also provided funds as well as contracts to buy and distribute the women’s jeans that Colt will make.

Also on hand for the ceremonies will be Jim Hightower, the innovative Texas commissioner of agriculture, who was responsible for getting a measure on next November’s ballot in Texas that will make more funds available to the workers to expand their company.

If it is approved, the state will create a pool of money from special revenue and general obligation bonds to encourage economic development. That, Hightower says, will extend to the textile and apparel industry and, in particular, could be used to help Colt’s worker-owners expand their manufacturing capacity.

The worker-selected managers of Colt have a union contract with ACTWU, and the pact includes some unique provisions. For instance, one requires the company and union to “promote the rights of workers to organize democratic unions throughout Texas . . . and help promote cooperatives as an alternative to plant closings and under-employment.”