Seoul (AsiaNews/SCMP) South Korea's largest trade union has agreed to keep salaries stable in return for greater job security. This is part of an pro-employment deal reached with employers and the government to increase jobs.
However, the agreement has already been rejected by the country's second-largest labor union, the Korean Confederation of Trade Unions (KCTU).
KCTU organized many of the strikes which shook the country in the past. "It is likely that the agreement to stabilize wages will be used to forcibly restrain workers' pay at large companies," said the KCTU, which claims to have 590,000 members.
The wide-ranging "Social Contract to Create Jobs" is an attempt by a tripartite commission made up of labor, management and government officials. Their goal is to forge more co-operative labor-management relations in Asia's fourth-largest economy.
As part of the agreement, Federation of Korean Trade Unions, South Korea's largest union, agreed to not demand huge wage increases over the next two years.
"Labour will refrain from asking for excessive increases in wages and will set the rate of increase within the scope of improved productivity and the rise in prices," said Kim Won-bae, a member of the tripartite commission.
In return, employers will avoid laying off workers and agree to negotiate with trade unions when forced to eliminate jobs.
The deal has been welcomed by foreign investment groups, who often say industrial action and labor inflexibility are major obstacles to investing in the country,
"If this agreement is put into action, it would be a fantastic turnaround," said Kim Whan-Soon, South Korea's foreign investment ombudsman.
The deal will be presented today to a full session of the tripartite commission, headed by President Roh Moo-hyun. The president has set solving unemployment as the government's major priority for the year.
In 2003 South Korea' unemployment rate rose to 3.4% from 3.1% in 2002. Rising unemployment is one of the main reasons that consumer confidence is down, despite a fragile economic recovery.
Many manufacturing jobs which used to come to South Korea have relocated to China.
According to a report by the Korea International Trade Association, South Korea's labor costs have risen faster than those of comparable countries, slowing down the competitiveness of the country's economy.
Following steep pay increases at large companies which fell to pressure from unions, hourly South Korean labor costs rose 17.3% in 2002 to 9.16 US dollars, compared with 7.27 dollars in Singapore, 5.83 dollars in Hong Kong and 5.41 dollars in Taiwan, according to KITA.