UNION BRIEFS AMBASSADOR ON HISTORY, GOALS, OUTLOOK

C O N F I D E N T I A L SEOUL 000415

SIPDIS

E.O. 12958: DECL: 03/17/2019
TAGS: ELAB KS
SUBJECT: UNION BRIEFS AMBASSADOR ON HISTORY, GOALS, OUTLOOK

Classified By: Amb. Kathleen Stephens. Reasons 1.4 (b,d).


1. (C) SUMMARY: In a meeting with the Ambassador on March
16, representatives from the Federation of Korean Trade
Unions (FKTU),the more conservative of Korea's two umbrella
labor unions, provided a briefing on the current status of
Korean labor-management relations, discussed the umbrella
union's plan to prevent layoffs, and highlighted the USFK pay
cap issue. FKTU President Jang Seok-chun told the
Ambassador that the FKTU was now focusing on two primary
issues. The first was a dialogue-based approach to
cooperating with the government to overcome the financial
crisis. FKTU was part of a labor-government-business
cooperative effort to alleviate the fallout of the economic
downturn. The second major issue for FKTU was its opposition
to the Ministry of Labor's efforts to change the law
governing irregular workers. Chi Hyon-taek, National
President of the USFK Korean Employees (sic) Union, told the
Ambassador that USFK's pay cap deprived Korean workers at
USFK of the right to collective bargaining guaranteed by the
Korean Constitution; the Ambassador noted the pay cap was
Congressionally-mandated in the U.S. but that the Embassy
would report his concerns. END SUMMARY.

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FKTU Background
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2. (SBU) The antecedent to the Federation of Korean Trade
Unions (FKTU) was established in 1946, but the current
iteration of the organization dates back to labor law
revisions in 1980, which allowed for unions but mandated they
be enterprise- and not industry-based. Under the 1980
revision, the South Korean government, led by authoritarian
President Chun Doo-hwan, established FKTU in an effort to
control the labor movement. In the late 1980s, elements of
the FKTU became dissatisfied with the collusion between the
union leadership and the government, and in 1990 formed a
competing organization called the Korean Confederation of
Trade Unions (KCTU). The KCTU views itself as the legitimate
heir to the workers' struggle, and is more radical -- and
often more violent -- than the FKTU. The two organizations
have cooperated in the past, but they disagree fundamentally
about their respective approaches to labor disputes. FKTU is
now quite independent of the government, but the organization
has remained close to its government roots, including with
the Lee Administration. In fact, FKTU agreed, through a vote
of its membership, to support Lee Myung-bak in the December
2007 presidential election, and FKTU President Jang Seok-chun
accompanied President Lee to the U.S. for the April 2008
summit.

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FKTU Rolls Out the Red Carpet
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3. (C) On March 16 President Jang organized an extensive
welcome and briefing for the Ambassador's courtesy call,
noting that it had been five years since a U.S. Ambassador
had visited FKTU headquarters. The Ambassador recalled the
long history of cooperation and communication between the
Embassy and FKTU, noting that there used to be a full-time
AFL/CIO representative in Korea working with FKTU on labor
union development. The Ambassador commented that labor
unions had played an important role in Korea's
democratization and said it was good to see that the FKTU
continued to play a central role in Korea's democracy.


4. (C) Jang emphasized his objective of ensuring that
foreign investors in Korea felt familiar and comfortable with
Korean labor relations. Korean industry was struggling due
to the global economic downturn, but Jang believed Korea
would be one of the first countries to recover because of the
cooperation between labor and management. Jang conceded that
foreign companies worried about stability in labor-management
relations, but said FKTU was working to ensure that relations
remained steady. The Ambassador welcomed Jang's confidence
in the Korean economy's ability to weather the crisis and
noted that U.S. and Korean approaches to recovery were
similar; both countries were making efforts to bring all the
stakeholders together to find cooperative ways to overcome
the crisis.

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Current Labor Environment
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5. (SBU) Jang, joined by half a dozen of his top management,
gave a thorough, prepared briefing on the FKTU, including a
breakdown of the unionized workforce and an overview of the
current status of labor-management relations. According to
the Ministry of Labor, the percentage of unionized workers
peaked in 1989 with 19.8 percent and has steadily declined to
10.3 percent in 2006. FKTU blamed this decline in part on
the increase of irregular workers. (NOTE: Irregular workers
are hired under contracts of one year or less, receive lower
pay, and are not entitled to the same benefits as regular
workers. END NOTE.) Jang noted that the percentage of
irregular workers in Korea was the highest in the developed
world. The pay gap between regular and irregular workers
contributed to the increasing economic polarization in Korea.


6. (C) The FKTU's biggest challenge was because of the
continued use of the enterprise structure, wherein unions are
company-based rather than industry-based. This structure was
instituted in 1980 and upheld during the 1987 labor law
revisions. According to FKTU, only seven percent of unions
had more than 500 members, but those unions represented 72.1
percent of the unionized workforce. Conversely, 66.8 percent
of unions had less than 100 members, but they only
represented 7.7 percent of unionized workers. FKTU explained
that this enterprise-based union structure was to blame for
the volatility in labor-management relations. The system
presented difficulties in all negotiations, introducing
significant distrust into labor-management relations. FKTU
was hoping to eliminate the enterprise-based approach but
offered no detail on how it would do so.

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Social Contract
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7. (C) FKTU representatives emphasized that their goal was
to strengthen labor-management relations through dialogue.
The umbrella organization was working to establish a new
paradigm of labor-management relations in order to boost
national competitiveness. To achieve this, the union had two
primary objectives. The first was to work with the
government and business to overcome the current financial
crisis. The second was to reduce the number of irregular
workers.


8. (C) President Jang noted that during the 1997 Asian
Financial Crisis, companies were forced to lay off large
numbers of men in their 40's and 50's, most of whom were the
primary wage earners in their families. FKTU's goal was to
prevent such layoffs from happening again. On January 22,
FKTU and the Korea Employers Federation (KEF) held a joint
press conference to propose the establishment of a
tri-partite cooperative body comprised of labor, government,
and management to overcome the economic crisis, and on
February 23, the organization announced that it had come to
an agreement. In part, the union agreed that workers in
companies that are having financial difficulty would return a
portion of their wages and benefits. Workers in companies
facing dire economic problems would also consider job sharing
as a means to prevent job loss.

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Irregular Workers
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9. (C) Under current law companies have two years to convert
irregular workers into permanent employees. The Ministry of
Labor, however, has proposed extending this time limit to
four years, arguing that it will give companies more time to
convert workers and result in fewer lay offs. FKTU opposed
the revision, demanding instead that the government focus on
providing subsidies to companies as an incentive for
converting these workers. If the compensation gap between
regular and irregular workers was narrowed, the union argued,
converting these employees would be easier. Jang said FKTU
understood the difficult position the government was in but
extending the time limit would effectively downgrade these
workers. Providing incentives to companies for converting
irregular workers was a better approach, he argued.

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Crisis is Deeper, More Serious Than in 1997
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10. (C) In response to the Ambassador's query about
comparisons between the current situation and the Asian
Financial Crisis, Jang said the current situation was worse.
In the late 1990's there were large-scale layoffs, but the
export sector remained strong. This downturn was deeper and
more serious, which necessitated the social pact and working
cooperatively to overcome the crisis.

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USFK Pay Cap
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11. (C) The USFK Korean Employees Union (KEU) President Chi
Hyon-taek, also at the meeting, raised the issue of the USFK
pay cap on Korean employees' salaries. (NOTE: The pay cap is
Congressionally-mandated under the Defense Appropriations Act
and limits locally employed staff salary increases to the
greater of raises granted to U.S. and Korean Government
employees. END NOTE.) Chi said that the USFK-KEU members
wanted to have the right to wage negotiations, but that the
pay cap deprived workers from collective bargaining, a right
guaranteed by the Korean Constitution. The Ambassador
thanked Chi for raising the issue, noted her understanding
that the pay cap provisions were Congressionally mandated,
but said the Embassy would ensure Washington was aware this
continued to be a concern to USFK-KEU members. She said
that both the Embassy and USFK, along with American
businesses in Korea, wanted to be the best possible
employers, and it was helpful to hear FKTU's views on this
issue.

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Comment
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12. (C) Although only around 10 percent of the Korean labor
force is unionized, labor unions are a powerful influence in
Korean economic scene, often at the receiving end of
complaints from foreign and domestic businesses. Some of
this is due to the "consensus" nature of Korean negotiations,
but the largest blame is, as our FKTU contacts mention, due
to workers being organized at the company-level, rather than
at the industry-level. There have been several efforts to
reform this cumbersome system, but none have had any traction
because individual unions will not give up their authority.
STEPHENS