Yesterday’s New York Times had a fascinating dispatch by Choe Sang-Hun on the gulf separating contract workers and permanent staff workers in South Korea.
South Korean workers used to join a company expecting lifetime employment. But after the Asian financial crisis in the late 1990s, businesses began using temps, who work full time but on short-term contracts. They earn less and are easier to fire. Such a trend can also be seen other parts of the world that have rigid labor markets, especially in Europe.
The number of contract workers in South Korea is estimated by the government at 5.4 million, or 33 percent of the country’s wage earners. As of March, a typical nonregular worker earned 1.2 million won, or $960, a month — 60 percent of the average wage of regular workers.
Unlike their regular counterparts, whose pay goes up according to seniority along a tenure track, they start at the bottom of the wage scale and remain there. They receive fewer health care benefits and less unemployment insurance, and they rarely have the shield of a union.
Suffice to say, young workers tend to be contract workers. The National Assembly has now required that “temps” working for two years or more must be made permanent staff workers. And so firms are letting go of contract workers in droves.
Union activists feel threatened by cheap temps, who they believe are undercutting the wages of permanent staff workers. Management wants to preserve the flexibility of being able to hire contract workers for any length of time.
One wonders if there might be some kind of “third way,” to use an overused phrase, in which the rigidity of temporary staff jobs were relaxed and all workers were given some cheaper, more flexible set of labor market protections. In the late 1990s, the unconventional leftist thinker (and Harvard Law professor) Roberto Unger attacked his fellow Latin American lefists for “defending the vested rights of organized workers” rather than the interests of the “unorganized majority.” This is a problem we see across the developing world, and to a lesser extent in the advanced economies where public sector workers are, by virtue of their political powers, emerging as a kind of aristocracy of labor. No, not in the sense of earning obscenely high wages, but in the sense of enjoying far more favorable terms of employment than their equivalents in the private sector.
The advent of “contract workers” has also caused considerable controversy in Europe, where relaxed labor protections for the young are seen as a way of fighting youth unemployment. Very understandably, young workers resent being placed in a separate but unequal category of employment that is far more precarious than what their elders enjoy. But what has to go isn’t flexible employment terms — rather, it is the outsized privilege of permanent staff workers.