Koreans Worry About Increasing Layoffs

Koreans Worry About Increasing Layoffs

by Andrew Pollack

SEOUL, South Korea -- Kim Kyoung Ae scraped by for 11 years on her modest wages as an assembler at a telephone factory near Seoul. But in October the factory was shut down by Haitai Group, the troubled conglomerate that owns it, leaving Ms. Kim facing the abyss.

Ms. Kim, who is divorced with a daughter in junior high school, said her savings would run out in a month. Her retirement pay, expected to be $10,000, will not last long either. Her daughter was forced to quit the after-school tutoring that most Koreans consider almost as important as food and shelter. And while Ms. Kim will not be forced into the street -- she lives in her mother's house -- she has stopped contributing to the household expenses.

"If I don't get a job soon, I'm in big trouble," Ms. Kim, 46, said. "But the fact is there are no jobs out there for a woman my age. Even when I go to the unemployment office, they treat me like a beggar because I've been there so many times."

The specter of widespread unemployment is hovering over South Korea, a country that has barely known joblessness since the last oil shock, and one in which workers take pride in their rise from the peasantry to the middle class in a single generation. Lifetime employment is considered the norm in big companies, and not earning one's keep has been viewed as a dishonor.

The crisis that has shaken Korea in the last several weeks showed some sign of easing Tuesday as Korea's currency, the won, and the stock market strengthened on prospects that the nation would avoid a default on its international debt. The dollar closed at 1,425.0 won Tuesday, compared with 1,563.9 on Monday. The stock exchange's composite index rose 4.8 percent, to 404.26.

But even if it avoids default, Korea is expected to face much slower economic growth and further corporate bankruptcies next year under the economic supervision of the International Monetary Fund, which organized a $57 billion financial bailout earlier this month.

The government estimates that unemployment will rise from about 2.5 percent this year to 3.9 percent next year, while some other analysts think it will climb as high as 7 percent. Either way, economists say the number is vastly understated because the government ignores those who are out of work but have given up trying to find a job. Also, people who work only a few hours a week are included as employed.

A 5 percent level would be the highest unemployment since the last big recession in the early 1980s. With 1 million to 1.5 million people out of work and with food and fuel prices rising because of the depreciation of the won, the stage could be set for widespread social unrest, some analysts say.

In the third quarter of the year, about 29,800 people lost their jobs, double the number of a year earlier, according to the government. In more than 60 percent of those cases an employer failed. In the others, workers either retired voluntarily or were laid off.

Job security is a prime topic in the media. In a recent television drama, a dismissed worker, unable to tell his family the truth, uses his severance pay to buy his first car. His wife and young son are overjoyed as he takes them for a drive, holding back his tears. After dropping them off, he drives over a cliff, though his life is saved by the car's air bag.

That episode shows a painful side of joblessness in Korea -- a deep sense of shame. People who "voluntarily" retire in return for extra severance pay are called honorable retirees. But the Korean term for that is often shortened to "myoung tae," which means a dried fish.

"If you're at marrying age, it's just pathetic" to be jobless, said Lee Kyoung Ho, 27, who was laid off by a computer-services company. "I try to avoid other people except my absolutely closest friends."

Slowly, however, that attitude is beginning to change, as unemployment mounts. "Since the number of honorable retirees has increased a lot, people are not really embarrassed at not having a job," said Yoon Dae Hyun, 52, who lost his job when his employer, a construction company, declared bankruptcy.

Many economists would argue that layoffs must occur, so that workers can move to enterprises where they are more needed and the economy can adjust to changing conditions.

But under Korean law, it is illegal for a company to dismiss workers unless the company is in dire straits. Even then, the company must first consult with workers, though the employees cannot veto the layoffs. Many companies are first cutting investments, then cutting salaries and only as a last resort cutting workers.

Moreover, the South Korean public seems unwilling to bear the pain of such a redeployment, and the government is doing what it can to avoid it. Kia Motors, a bankrupt carmaker, was taken over by the state and is still producing cars in a glutted market. The government also nationalized two distressed banks to keep them from closing.

Kim Dae Jung, a front-runner in the presidential election on Thursday, is promising a six-month moratorium on layoffs if he is elected. But the Korean government has agreed with the IMF to enhance labor-market flexibility, so layoffs are expected to become easier to carry out.

One reason for the public aversion to layoffs is that the government's social safety net is so skimpy. Unemployment insurance did not exist until 1995. Now dismissed workers receive 50 percent of their salaries for 30 to 210 days, depending on how long they worked. There is little in the way of job retraining.

Another reason is the fear of labor unrest. So far, the unions have not taken to the picket lines in protest. Kim Tae Hyun, director of the planning department at the Korean Confederation of Trade Unions, which led the strikes a year ago when a short-lived law made it easier to dismiss workers, said the group first wanted to press employers to shorten working hours.

Wages and workers' right to organize were suppressed during Korea's three decades of military rule. But when democracy came in 1987, workers' pent-up rage exploded into strikes. Since then, wages have soared 15 percent a year.

Kim Hoon Gil, an electrical technician at a shipyard in southwestern Korea, was carried by the rising tide. He bought his first television four years ago, his first car three years ago and a VCR last year. He has a piano for his two young daughters to play.

He can make about $1,500 a month when he works a half-day on Saturday and all of Sunday on overtime. Moreover, his two-bedroom, 700-square-foot apartment in the company complex is basically free -- he pays only utility bills.

But now his middle-class lifestyle is threatened. The shipyard's owner, Halla Engineering and Heavy Industries, declared bankruptcy on Dec. 6 and has said it will dismiss half its 6,000 workers by the end of the month. Kim is anxiously waiting to see if the ax falls on him.

Already, his paychecks have been late -- and smaller.

"We're pretty much at the edge of the cliff," said Kim, 39. "When Koreans are over 40, it becomes really difficult to get a job. If you get laid off at this age, you become an invalid."

The Halla shipyard opened only about three years ago outside the city of Mokpo in southwestern Korea, the poorest section of the country. Workers from throughout Korea flocked here. Now they feel betrayed.

But the anger is directed less at the company than at the IMF, which many workers say created the climate in which bankers would not renew Halla's loans.

Now, there are rumors that the company will ask each family to pay a $10,000 one-time fee to stay in their apartments, an amount most cannot afford.

"Our greatest worry is we have to leave this apartment," said Oh Moon Hwan, 65, who lives with her son, a shipyard worker, and his family. "We will have no place to go in this cold." Already, she said, many elderly women who used to congregate in the apartment complex's "grandmothers' room" have moved back to their hometowns or to other relatives.

"They couldn't bear watching their children crying and worrying," she said. "They wanted to lessen the burden on them."