South Koreans Band Together to Save Jobs

By CHOE SANG-HUN

SEOUL — Around the world, global industrial giants like Sony and General Motors are shedding workers as the worldwide recession depresses demand for goods. But the biggest conglomerates in South Korea are trying something different: hiring new workers by the thousands.

South Korea is not the only country trying to prevent major job losses by asking workers to reduce hours or take pay cuts, but it has turned job preservation into something of a national drive, with the government appealing to both unionized workers and management to set aside differences for the economy’s sake. Saving jobs, President Lee Myung-bak has said, is “our No. 1 goal.”

This approach contrasts with the situation 10 years ago, when a similar financial crisis engulfed Asian economies. Under a prescription dictated by the International Monetary Fund, South Korea liquidated some of its most prized conglomerates and banks, adding a million to the ranks of the jobless — known then as “I.M.F.,” or “I’M Failure,” people.

“We learned lessons from 1998,” said Choi Byung-hoon, vice chairman of the government Economic and Social Development Commission. “When companies shed workers because the economy is bad, they will find themselves short of skilled workers when the economy recovers.”

In late February, the commission brought together industry groups, unions, civic and religious representatives and government to reach what was billed as a grand national deal to “share pains for social unity.”

Although the agreement was not legally binding — and it remained to be seen whether this deal would save the economy or was merely delaying the pain — workers in major conglomerates have since accepted wage freezes. Unions have promised not to strike. Executives have cut their own wages, and those of new recruits, by as much as 30 percent, with a promise to use the cost savings to hire young job-seekers.

“This is an excellent time to find good talent,” said Kang Duk-soo, chairman of the shipping and shipbuilding group STX, referring to the fast-rising unemployment rate among college graduates.

At Mr. Kang’s conglomerate, executives agreed to cut their salaries by 10 percent to 20 percent in return for no layoffs, no strikes and the hiring of 1,500 new workers.

Mr. Lee has chastised bankers for hanging on to their high salaries while asking for taxpayers’ money to ease their cash crunch. Last week, executives at KB and Shinhan, the nation’s two largest financial groups, returned their stock options in a “voluntary action to share pains and responsibility for the economic crisis.”

For its part, the government will spend 4.9 trillion won, or $3.5 billion, to create 550,000 jobs. Schools will hire more temporary teachers.

The government will give tax breaks and pay part of the wages when small companies send workers on vacation instead of firing them, or hire temporary workers.

Government officials and military officers have volunteered to return as much as 10 percent of their pay and donate it to create jobs for the needy.

Appeals to the communal spirit come naturally in this resource-poor country, where “save the economy” becomes a national mantra in times of crisis. During the 1997-98 Asian economic crisis, South Koreans lined up at banks to turn in their families’ gold trinkets so that the government could melt them down into ingots and raise badly needed foreign currency.

South Korea was the first among Asian economies to come out of the deep recession, but at a heavy cost. The experience undermined one of the strongest assets of the South Korean economy — the communal harmony at work sites — as the country learned the previously unfamiliar concepts of layoffs and a flexible labor market. Income inequality deepened as the use of temporary workers increased.

Before South Korea was forced to go to the I.M.F. for a $57 billion bailout, management guaranteed lifetime employment. In return, workers put in long hours at low pay and showed absolute loyalty to managers’ decisions. “Buy Korea” was the civic duty, and the company was an employee’s second home.

With the Asian financial crisis dismantling that social contract, mistrust disrupted relations between management and labor, often hobbling companies’ productivity in the process. Union leaders sat at the bargaining table wearing red headbands that proclaimed: “We will fight you to the death!”

Yet it is another economic crisis that has brought unions and management together, for the purpose of saving jobs, and in turn, the economy.

“If our focus in 1998 was restructuring ourselves, our emphasis now is on sharing pain and jobs, because this crisis is not of our own making and comes from the outside,” said Mr. Choi of the economic commission. “Our approach will help promote the love-your-company mentality.”

The biggest challenge facing South Korea now is not to restructure its companies, as is the case in the United States, but to revive consumer spending — a problem that would worsen if companies fired workers, said Yi Jong-goo, standing commissioner of Financial Services Commission, the government’s chief financial regulator.

Jobless South Koreans have traditionally relied on personal savings and support from their families. The country’s social safety net remains grossly inadequate to absorb a sudden increase in unemployment, another factor that raised alarms when the country’s jobless rate climbed to 3.9 percent in February, from 3.5 percent a year earlier.

But some economists warn that the government’s recipe for sharing the pain may only prolong it. Most jobs it hopes to create are for temporary workers whose contracts will expire by the end of this year.

The danger is that if the economy does not rebound by then, South Korea will have already spent 39 trillion won, equal to 4 percent of its gross national product, in a stimulus package that risks ballooning the national debt by 19 percent to 367 trillion won. That debt would be equivalent to 38.5 percent of the G.D.P.

Big South Korean companies have room to hold off on layoffs because they underwent restructuring a decade ago, and the weakness of the won is helping exports. But Nam Yong, vice chairman of LG Electronics, recently said that he feared what would happen if the won started climbing again, especially against the Japanese yen. LG Group is hiring 6,000 workers this year, the most among South Korean companies.

South Korea hopes that the United States and other governments, especially those in Europe, agree to adopt coordinated economic stimulus actions to spur the global economy to a rebound. Without the recovery of global markets, any stimulus to South Korea’s export-driven economy might fizzle.

This week at the Group of 20 summit meeting of leaders of industrialized and emerging nations in London, Mr. Lee, the South Korean president, is expected to condemn protectionist measures adopted by governments amid the global economic downturn.

“The world must move together,” said Noh Dae-lae, an assistant deputy minister of strategy and economy. “If the crisis goes on, our job-sharing program can burden us.”

Discontent is already brewing in South Korea, despite the calls for unity. One of the largest labor groups in the country, the Confederation of Korean Trade Unions, refused to join the government-led job-sharing deal. It dismissed the program as a “stopgap trick” and a waste of taxpayers’ money. It also criticized the effort as doing little to create meaningful jobs but helping big businesses by cutting wages, mostly for new workers who have no power to negotiate with management.

“Even if I am jobless and desperate, I don’t like this idea of hiring more people at lower wages,” said Lee Dong-chan, 31, a former garment wholesaler who is now enrolled in a government-financed training program for the unemployed. “It hurts only the poorest of workers.

“Even if I get a job this way, I’ll only work for a few months,” Mr. Lee said, “and during that time I’ll always feel like a pathetic extra who exists at the generosity of other workers.”