소장기록
제목Wages in Korea
설명Introduction Wages have two significant effects on the national economy. Not only are wages a factor that determines competitive power in the international market, but they are also a source of consump-tion that determines the size of domestic demand. The issue of appropriate wage level has important implications for both labor and management, and the national economy as a whole. The Korean economy underwent severe difficulties following the request to the International Monetary Fund for bailout loans in late 1997. Numerous companies and workers felt as if they were walking on thin ice everyday: they were suffering from bankruptcies and employment instability, respectively. Wage issues, including level and structure, have been at the core of dis-cussion. Until late 1997, the Korean economy had enjoyed rapid growth based on excellent and cheap human resources. However, excessive expansion of companies and high consumption con-tributed to bubbles within the economy such as the soaring prices of housing and drastically increased wages. As a result, the com-petitiveness of Korean companies weakened greatly in a short period of time due to rising production costs, rigid wage struc-tures, low productivity and inefficient management. However, the Korean economy is entering the era of advanced industrial technology following an era of high wages. In addition, faced with the challenge of introducing knowledge management, companies are paying more attention to the rationalization of wage management, which can be a determinant of managerial efficiency. So far, the international competitiveness of Korean goods has been derived mainly from low prices, and wage levels in Korea were relatively lower than those of competing nations until 1987. Since then, however, Korea’s wage levels have been the highest among newly emerging Asian competitors, including Taiwan, Singapore and Hong Kong, as a result of continued wage hikes that exceeded increases in productivity. In terms of quality, the comodity rejection rate is slightly higher than that of Japan due to decreased willingness to work. For these reasons, the prices and qualitative competitiveness of Korean export goods are plunging. Therefore, it is necessary not only to rationalize the management of wages but also to manage them so that productivity is raised through maximization of worker motivation. Wage determination systems, the criteria that determine indi-vidual worker’s wages, has emerged recently as an important issue. In Korea, the basis of the wage determination system has been a seniority-based pay system in which individual worker’s wages are determined by personal properties such as schooling and length of service. However, many problems related with the seniority-based pay system, including difficulty to induce worker motivation, are pointed out. In order to eradicate rigidities in the seniority-based pay system, efforts have been made in many areas. These efforts, which include exploring ways of introducing job-capability-based pay systems, diffusion of annual salary sys-tems and gain-sharing systems, might be important in this con-text. Another important issue is the wage composition system, which reflects the content of items and proportion of each item that constitute wages. The wage system in Korea is very complicated due to vari-ous kinds of allowances, and is based on seniority-linked pay, which makes it difficult for wages to accurately reflect a worker’s capability, contribution, and business performance. Complicated wage composition, in which the share of basic wages is low and many different kinds of allowances are included, is an important factor that produces difficulties in the management of wages. As a result, the fundamental purposes of wage management, includ-ing enhancement of productivity and motivation of workers, are greatly weakened. The current seniority-based wage system is the result of the past low-wage era, when securing living wages was given priority, and of the unique cultural tradition which emphasized seniority. Even though the seniority-linked wage system was deemed rea-sonable in the past, it faces growing challenges today as a reason-able management culture is emerging due to advanced industri-alization. Korea has to choose whether it will allow its companies to succeed and grow further by improving the current wage sys-tem at a time when new changes, i. e. paradigm shifts, are taking place, or allow them to fail by doing nothing. It is inevitable for companies to change the seniority-based wage system into a performance-based one, increasing the effi-ciency of the wage system amid new trends in personnel man-agement systems. A wage system that can bring about high worker productivity will enhance productivity of companies by enabling long-term efficient utilization of human resources. In terms of the promotion of international competitiveness through enhanced productivity and the induction of foreign direct investment in Korea, wages are a very important factor that influences the competitiveness of not only Korean companies but of the entire nation. We will look at general wage issues in the areas of labor laws, wage levels, wage systems and types of wages. We also will explore ways to promote efficient wage man-agement by examining the current status and problems of wage management. In particular, we are going to focus on the realities and uniqueness of wages in Korea by explaining the labor market and working conditions. Workers view wages as a means of living income. For com-panies, they represent a part of production costs. Considering other fixed production costs such as raw materials, interest and land, wages and profit are bound to conflict with each other-if one increases, the other decreases. The distribution of wages and profit is the fundamental problem between labor and manage-ment, and the view that wages and profit are in conflict with each other is prevalent. It is clear that the issue of distribution is an important side of labor relations: however, that is so only during times of distribution such as collective bargaining. Both labor and management can benefit from an increased share of the pie when the competitiveness of companies is pro-moted by enhancing productivity through labor-management cooperation and development of workers’ capabilities. When taken from the productivity angle rather than just from the dis-tributive view, wages are a useful means of promoting productiv-ity and securing superior manpower through the motivation of workers. When wages are seen as total reward system to moti-vate workers, and are not considered just in terms of amount, the effectiveness of wages increases. The world is now entering the era of “economic war without weapons”, to quote rhetoric from journalism. In order to survive this severe competition, it is essential for an economy to strength-en its international competitiveness, which is possible only through the promotion of productivity. Productivity can be enhanced by promoting a fair wage system, efficient wage man-agement and a wage system conducive to the development of workers’ capabilities. Only when wage payments are linked to the characteristics of jobs, workers’ capabilities and business per-formance, will they be able to function as the means for motivat-ing workers and efficient management by companies. Wages are defined as, according to Article 18 of the Labor Standards Act, “wages, salary, and any other payment to a work-er from an employer as remuneration for work, regardless of the designation by which such payment is called.” Various terms such as wages, salary, and allowances are in use but the meaning of the terms is the same. Sometimes, however, the term “wages” is used for the remuneration of manual and factory workers, while the term “salary” is reserved for the remuneration for office workers. That is, the former is deemed as remuneration for blue-collar workers in which overtime work is strictly calculated with fixed working hours as a unit of calculation, while the latter is remuneration for white-collar workers calculated on the basis of the total labor provided for a certain period of time, with over-time work not included. In any event, manual labor and mental labor is included in term “labor” by the Labor Standards Act, and are not dealt with differently in the implementation of labor laws in Korea. No exempt-clause exists in Korean labor laws. Since wages are the only means of living for workers, they should be defined as clearly as possible in the labor laws. However, there are few cases where international labor agree-ments and laws of other countries provide a detailed and clear definition of wages. It is not easy to define wages clearly because the payment of wages is carried out in various forms. The above-mentioned legal provision gives an abstract definition of wages, stating that “wages” are any kind of payment to a worker from an employer as remuneration for work, regardless of the designa-tion by which such payment is called. Whether or not money and other valuables paid to a worker constitute wages may be decid-ed in accordance with case-by-case interpretation of the legal pro-vision on the definition of wages. In sum, Korean management practices surrounding wage issues are now in a stage of transition. The most direct driving forces lie in the foreign-exchange crisis of late 1997. Traditional methods of wage management were forced to change in the wake of overall reform measures that took place in the Korean econo-my after the International Monetary Fund bailout loan. In retro-spect, the wage level in Korea was very low before 1987 and the wage competitiveness of Korean goods was highly evaluated in the international market. However, this scenario changed after 1987 when democratic reforms were implemented. Since then, monetary wages increased at a rate exceeding 10 percent per annum up to 1996. Many people became concerned about the hyper-increase of wages, and many companies went abroad to find low-wage areas. However, the foreign exchange crisis in 1997 changed all aspects of the Korean economy. Wage increases froze or decreased, and an annual salary system is being implemented instead of merely being discussed. Concerns about employment made employees accept wage-freezes, and concession bargaining is commonplace in many negotiations. The wage-raising effect of trade unions has been minimal due to the weakening of unions, and employment security came up as a first priority issue in union strategy. Facing these situations, worker-protection laws are blamed for being still very rigid and not able to reflect social changes. It is fair to say that overall economic circumstances made every economic agent in Korea, including employers, trade unions, workers and the government, think twice about econom-ic practices of the past.
생산자김윤배 외
날짜2000-11-01
기록유형문서류
기록형태보고서/논문
주제정치경제
연관링크http://www.kdi.re.kr/research/subjects_view.jsp?pub_no=2233&pg=3&pp=1000&mcd=001002001
식별번호KC-R-00459
제목Wages in Korea
설명Introduction Wages have two significant effects on the national economy. Not only are wages a factor that determines competitive power in the international market, but they are also a source of consump-tion that determines the size of domestic demand. The issue of appropriate wage level has important implications for both labor and management, and the national economy as a whole. The Korean economy underwent severe difficulties following the request to the International Monetary Fund for bailout loans in late 1997. Numerous companies and workers felt as if they were walking on thin ice everyday: they were suffering from bankruptcies and employment instability, respectively. Wage issues, including level and structure, have been at the core of dis-cussion. Until late 1997, the Korean economy had enjoyed rapid growth based on excellent and cheap human resources. However, excessive expansion of companies and high consumption con-tributed to bubbles within the economy such as the soaring prices of housing and drastically increased wages. As a result, the com-petitiveness of Korean companies weakened greatly in a short period of time due to rising production costs, rigid wage struc-tures, low productivity and inefficient management. However, the Korean economy is entering the era of advanced industrial technology following an era of high wages. In addition, faced with the challenge of introducing knowledge management, companies are paying more attention to the rationalization of wage management, which can be a determinant of managerial efficiency. So far, the international competitiveness of Korean goods has been derived mainly from low prices, and wage levels in Korea were relatively lower than those of competing nations until 1987. Since then, however, Korea’s wage levels have been the highest among newly emerging Asian competitors, including Taiwan, Singapore and Hong Kong, as a result of continued wage hikes that exceeded increases in productivity. In terms of quality, the comodity rejection rate is slightly higher than that of Japan due to decreased willingness to work. For these reasons, the prices and qualitative competitiveness of Korean export goods are plunging. Therefore, it is necessary not only to rationalize the management of wages but also to manage them so that productivity is raised through maximization of worker motivation. Wage determination systems, the criteria that determine indi-vidual worker’s wages, has emerged recently as an important issue. In Korea, the basis of the wage determination system has been a seniority-based pay system in which individual worker’s wages are determined by personal properties such as schooling and length of service. However, many problems related with the seniority-based pay system, including difficulty to induce worker motivation, are pointed out. In order to eradicate rigidities in the seniority-based pay system, efforts have been made in many areas. These efforts, which include exploring ways of introducing job-capability-based pay systems, diffusion of annual salary sys-tems and gain-sharing systems, might be important in this con-text. Another important issue is the wage composition system, which reflects the content of items and proportion of each item that constitute wages. The wage system in Korea is very complicated due to vari-ous kinds of allowances, and is based on seniority-linked pay, which makes it difficult for wages to accurately reflect a worker’s capability, contribution, and business performance. Complicated wage composition, in which the share of basic wages is low and many different kinds of allowances are included, is an important factor that produces difficulties in the management of wages. As a result, the fundamental purposes of wage management, includ-ing enhancement of productivity and motivation of workers, are greatly weakened. The current seniority-based wage system is the result of the past low-wage era, when securing living wages was given priority, and of the unique cultural tradition which emphasized seniority. Even though the seniority-linked wage system was deemed rea-sonable in the past, it faces growing challenges today as a reason-able management culture is emerging due to advanced industri-alization. Korea has to choose whether it will allow its companies to succeed and grow further by improving the current wage sys-tem at a time when new changes, i. e. paradigm shifts, are taking place, or allow them to fail by doing nothing. It is inevitable for companies to change the seniority-based wage system into a performance-based one, increasing the effi-ciency of the wage system amid new trends in personnel man-agement systems. A wage system that can bring about high worker productivity will enhance productivity of companies by enabling long-term efficient utilization of human resources. In terms of the promotion of international competitiveness through enhanced productivity and the induction of foreign direct investment in Korea, wages are a very important factor that influences the competitiveness of not only Korean companies but of the entire nation. We will look at general wage issues in the areas of labor laws, wage levels, wage systems and types of wages. We also will explore ways to promote efficient wage man-agement by examining the current status and problems of wage management. In particular, we are going to focus on the realities and uniqueness of wages in Korea by explaining the labor market and working conditions. Workers view wages as a means of living income. For com-panies, they represent a part of production costs. Considering other fixed production costs such as raw materials, interest and land, wages and profit are bound to conflict with each other-if one increases, the other decreases. The distribution of wages and profit is the fundamental problem between labor and manage-ment, and the view that wages and profit are in conflict with each other is prevalent. It is clear that the issue of distribution is an important side of labor relations: however, that is so only during times of distribution such as collective bargaining. Both labor and management can benefit from an increased share of the pie when the competitiveness of companies is pro-moted by enhancing productivity through labor-management cooperation and development of workers’ capabilities. When taken from the productivity angle rather than just from the dis-tributive view, wages are a useful means of promoting productiv-ity and securing superior manpower through the motivation of workers. When wages are seen as total reward system to moti-vate workers, and are not considered just in terms of amount, the effectiveness of wages increases. The world is now entering the era of “economic war without weapons”, to quote rhetoric from journalism. In order to survive this severe competition, it is essential for an economy to strength-en its international competitiveness, which is possible only through the promotion of productivity. Productivity can be enhanced by promoting a fair wage system, efficient wage man-agement and a wage system conducive to the development of workers’ capabilities. Only when wage payments are linked to the characteristics of jobs, workers’ capabilities and business per-formance, will they be able to function as the means for motivat-ing workers and efficient management by companies. Wages are defined as, according to Article 18 of the Labor Standards Act, “wages, salary, and any other payment to a work-er from an employer as remuneration for work, regardless of the designation by which such payment is called.” Various terms such as wages, salary, and allowances are in use but the meaning of the terms is the same. Sometimes, however, the term “wages” is used for the remuneration of manual and factory workers, while the term “salary” is reserved for the remuneration for office workers. That is, the former is deemed as remuneration for blue-collar workers in which overtime work is strictly calculated with fixed working hours as a unit of calculation, while the latter is remuneration for white-collar workers calculated on the basis of the total labor provided for a certain period of time, with over-time work not included. In any event, manual labor and mental labor is included in term “labor” by the Labor Standards Act, and are not dealt with differently in the implementation of labor laws in Korea. No exempt-clause exists in Korean labor laws. Since wages are the only means of living for workers, they should be defined as clearly as possible in the labor laws. However, there are few cases where international labor agree-ments and laws of other countries provide a detailed and clear definition of wages. It is not easy to define wages clearly because the payment of wages is carried out in various forms. The above-mentioned legal provision gives an abstract definition of wages, stating that “wages” are any kind of payment to a worker from an employer as remuneration for work, regardless of the designa-tion by which such payment is called. Whether or not money and other valuables paid to a worker constitute wages may be decid-ed in accordance with case-by-case interpretation of the legal pro-vision on the definition of wages. In sum, Korean management practices surrounding wage issues are now in a stage of transition. The most direct driving forces lie in the foreign-exchange crisis of late 1997. Traditional methods of wage management were forced to change in the wake of overall reform measures that took place in the Korean econo-my after the International Monetary Fund bailout loan. In retro-spect, the wage level in Korea was very low before 1987 and the wage competitiveness of Korean goods was highly evaluated in the international market. However, this scenario changed after 1987 when democratic reforms were implemented. Since then, monetary wages increased at a rate exceeding 10 percent per annum up to 1996. Many people became concerned about the hyper-increase of wages, and many companies went abroad to find low-wage areas. However, the foreign exchange crisis in 1997 changed all aspects of the Korean economy. Wage increases froze or decreased, and an annual salary system is being implemented instead of merely being discussed. Concerns about employment made employees accept wage-freezes, and concession bargaining is commonplace in many negotiations. The wage-raising effect of trade unions has been minimal due to the weakening of unions, and employment security came up as a first priority issue in union strategy. Facing these situations, worker-protection laws are blamed for being still very rigid and not able to reflect social changes. It is fair to say that overall economic circumstances made every economic agent in Korea, including employers, trade unions, workers and the government, think twice about econom-ic practices of the past.
생산자김윤배 외
날짜2000-11-01
크기 및 분량184쪽
언어영어
출처한국개발연구원
연관링크http://www.kdi.re.kr/research/subjects_view.jsp?pub_no=2233&pg=3&pp=1000&mcd=001002001
기록유형문서류
기록형태보고서/논문
대주제정치경제
소주제노동
자원유형기록
파일 98445be15ae0559d56688d434b43316e.pdf
공유하기
의견남기기
