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4 - Steel in the Republic of Korea
POSCO
By Park, Joon-Shik
Part b
Labour relations and collective bargaining
Changes in industrial relations since 1987
Before 1987 work stoppages in Korea were unimaginable, but after workers became organized in 1987 they began to voice their demands through various kinds of collective action. The steel industry was no exception. Although late, unions began to be organized in various workplaces, and where they were already organized they made their voices increasingly heard. Prior to 1987 workers in 40% of the steel companies were organized. After 1987 the remaining 15 companies that were members of the Korean Steel Industry Association were completely organized. In 1991, 48.2% of the Korean steel industry workforce were organized. When the de-facto non-union position of POSCO is taken into account, it means almost 90% percent of the major companies were organized. Compared with the 17.2% union membership throughout Korea, this is an extremely high total. The formation and actions of unions were important steps which had a major impact on existing managerial systems (Korean Steel Producers' Association, 1992).The authoritarian and one-sided managerial prerogative was being seriously challenged. Instead of absolute loyalty, voices demanding the democratization of the workplace and humane treatment were strengthened. Young workers were particularly strong in voicing the need for change. Young workers in Korea were mostly in their late twenties and early thirties; most were high school graduates. Young workers with a high educational level and well-developed social aspirations became the central group in almost every workplace in Korea. Their values were quite different from those of older workers. They aspired to a greater voice, more participation, and more humanization of work, thereby greatly increasing the pressure for change. The expression for such changes materialized in a militant union movement (Park, Joon-Shik, 1992).
Unionization therefore triggered changes in the existing institutional arrangements, including internal labour market systems. Skyrocketing wages made it more and more difficult to maintain the low wage dependent managerial system, and the rationalization of existing institutional arrangements became more and more important. Such pressure meant a significant change in the existing competitive strategy based on price competition.
The militant movement of steelworkers began to be curbed from the 1990s (table 4). A major issue in the industry was the payment of wages during strike days. The principle of "no work, no wage" began to be accepted after 1990. Apart from wage increases, the most important issue in collective bargaining was the various kinds of fringe benefits. The unions were very successful in obtaining increases in wages and fringe benefits. Material gains and improvements in working conditions were possible due to a combination of enhanced worker voices and largely favourable economic conditions. However, once the economic conditions began to turn down rapid improvements in wages and fringe benefits were no longer possible.
Table 4. Union density, Korea and the Korean steel industry, 1987-94
| 1987 | 1988 | 1989 | 1990 | 1991 | 1992 | 1993 | 1994 | |
| Union density Korea (%) | 18.5 | 19.5 | 19.8 | 18.4 | 17.2 | 16.4 | ... | ... |
| Union density Steel (%) | - | - | - | - | 46.1 | ... | ... | 47.0 |
| No. of strikes | 17 | 8 | 5 | 2 | 7 | 2 | 4 | 3 |
| Duration of strikes (days) | 5.7 | 19.0 | 35.4 | 9.5 | 18.8 | 8.5 | ... | ... |
| Source: Korean Steel Association (1992; 1995). | ||||||||
Even though the steel industry experienced a short period of labour-management conflict, the general mood of industrial relations and the collective bargaining system were cooperative. Compared with other heavy industries, such as shipbuilding and automobiles, the Korean steel industry maintained relatively peaceful and cooperative relations. In addition, managers have never lost their general control over the shop floor, whereas in the other heavy industries managerial prerogatives have been seriously challenged.
Several factors may explain this. First, wage levels and working conditions in the steel industry are relatively better than in other industries in Korea. Most steelworkers have better terms and conditions than shipbuilding or automobile workers. Second, the average age of steelworkers is much higher than in the other industries. In the automobile and other industries, where unions are active, younger workers have usually initiated militant unions. However, younger workers in the steel industry could not organize solid and active core groups and the existing older generation of workers have not lost control of the unions. Moreover, one of the most important reasons for the weakening of labour unions in the steel industry could arise from the failure of the union movement in POSCO, which has been always the reference point for the other steel companies. The failure of the labour movement in POSCO was a severe blow to the new militant labour movement elsewhere in the steel industry. The internal politics of the labour movement in POSCO show how major companies could maintain the upper hand over the labour movement in them.
Labour relations in POSCO
Managerial ideology and the early institutional setup of the POSCO style
The fact that POSCO had a long period of operation without unions prior to 1988 was due to the managerial ideology of the former president Park, Tae-Joon. Under his stewardship one of the most consistent objectives of the company's top management was to maintain a union-free company. To avoid union organization of its workforce the company developed its own management style and institutions. In fact POSCO was one of the first companies in Korea to emulate the so-called "Japanese management system". The company's top managers combined elements of "paternalistic management" with authoritarian and charismatic leadership styles (POSCO, 1992a; 1992b).POSCO's basic ideology was to set up a kind of social bondage in which the employee must show absolute commitment and loyalty in return for a guarantee of lifetime employment. Such a managerial ideology can be interpreted as a kind of "patriarchal company welfarism". POSCO was a forerunner in company welfarism among Korean companies and tried to maintain a union-free management by institutionalizing such ideologies. POSCO tried to assimilate possible sources of employees' needs within a strong company welfare regime.
POSCO's commitment to company welfare was based on maintaining a union-free environment and on assimilating and stabilizing a skilled workforce. Early in the company's history management had to solve the problem of the shortage of skilled manpower. To this end it tried to attract skilled workers to the company by providing superior company welfare. POSCO's company welfare system was thus closely linked to the combination of a stabilization of labour relations and manpower needs (POSCO, 1992a; 1993b).
During the 1970s, the company set up quasi-informal consultations called "conversation meeting with employees" and tried to institutionalize such informal meetings. In reality, however, it was not a voluntary and autonomous organization but a transmission belt of managerial authority. Long before the emergence of a formal labour relations, POSCO had developed important prototypes of an internal labour market and company welfare institutions. The internal promotion system, company welfare institutions, informal conversation meetings, and self-management programme at the shop floor level (Quality Control Teams) first appeared and evolved in the 1970s. POSCO also developed various kinds of informal "meetings" among employees and their families. So even without official and formal negotiation institutions the seeds of managerial institutions were in place before 1987 with the aim of maintaining a non-union company.
It was more than ten years after the company's founding before an official and formal consultation institution appeared in POSCO. A "joint-consultation committee between labour and management" was set up in 1981. Although this committee has guaranteed legal status, its bargaining power was extremely limited and its functions constrained. It could not negotiate wage issues so the topics for joint consultation were confined to minor issues. Even though an informal exchange of opinion and consultation was possible, formal collective bargaining was impossible within joint-consultation frameworks. The committee functioned as an official representative body of employees before the organization of a union, although the employees could not organize. But the selection of the employee representatives on the committee was tightly controlled by the company which effectively limited participation to the older foremen. The result was that this means for workers' representation functioned as an arm of management. As criticism of the joint consultation body mounted, in 1988 the company introduced direct voting for the selection of workers' representatives on the committee.
In addition to the joint consultation system, the company tried to maintain a variety of formal and informal company organizations to facilitate the smooth functioning of joint consultation. POSCO's labour relations continued to be managed according to a strong non-union principle and the company successfully postponed union organization until 1988. POSCO's managerial policies were the outcome of non-union strategies and such policies had a strong influence even after the organization of a union.
The union stage
A trade union was finally organized in POSCO in 1988, but three years later it was dissolved. None the less, even though the union stage was very short, this period provided valuable information on the strategies of the company and trade unions in Korea. This short period of unionized work can be divided into two phases. The first phase had relatively stable and cooperative labour-management relations. The second, short-lived, phase was a period of adversarial relations.The first union in POSCO was organized by a group of workers who were former members of the joint consultation committee. They were composed of an older generation of foremen who tried to maintain a cooperative relationship with management. At first the company acknowledged the union organization very reluctantly and tried to influence the ideology of the union's leadership as much as possible. A cooperative relationship was maintained on a fragile basis because this first union was not organized by direct voting of shop floor workers. Its leaders were indirectly selected -- a process encouraged by management. Moreover, they were informally considered by the company as a group of senior "staff" workers which made their co-option by management easier. Soon, however, young workers on the shop floor began to criticize the cooperative union leadership as lacking legitimacy.
The newly organized union tried to maintain a cooperative relationship with the management. They criticized authoritarian management and emphasized the democratization of management but confined their activities within the narrow boundaries of company unionism. The first union leaders tried to keep a clear distance from militant unionism. They constrained collective action and, instead of bargaining, tried to consult with management on main issues. They even regarded other company unions as a third party, and showed no intention of cooperating with other unions, including the higher level industrialization confederation. In 1989 POSCO's union and management reached their first collective bargaining agreement -- a 20% wage increase and more fringe benefits and allowances. Although the union and management tried to resolve major conflicts through collective bargaining, discussions also took place in frequent joint consultation meetings and the cooperative union's dependence on the company deepened as time passed.
During the short period of the cooperative union's activity, the company and the union reached agreement on some important issues. Union leaders agreed to participate in the company's quality improvement programme called SQC (Sales, Quality, Cost). The fact that a union participated in the quality movement was exceptional in the adversarial environment of Korea. In December 1989 the union and management made a joint proposal for the improvement of personnel management institutions and a uniform wage increase system was introduced. In 1990 POSCO's labour and management reached agreement on a wage freeze in return for innovations in promotion and wage systems.
But the internal politics of the union were not as smooth as its relations with the company. While senior workers and foremen showed a positive attitude toward cooperative leadership, younger and junior workers were considerably discontented with the existing leadership. As with other companies in Korea, the shop floor society was divided according to seniority and age. While junior workers wanted stronger and more autonomous leadership, older workers showed a preference for soft leadership. Young workers' discontent with a cooperative union mounted over time.
The process of selecting union leaders was a source of great conflict among the different worker groups. Young workers began to speak out against the selection rules and the first union had to change to a system of direct voting for the post of union president. With the changes in selection rules union politics greatly intensified.
As soon as the company officially acknowledged the union organization, various groups began to organize on the shop floor. They started as small informal groups; most of them conservative in character. Then some of the young group of dissident workers began actively to organize their discontent. They maintained a more autonomous position than that of other groups and dissenting groups began to gather round core members. They criticized the existing union leadership and tried to provide an alternative. They organized informal groups challenging the official leadership and finally took control of the union in 1990.
Their support base remained relatively weak since dissenting groups could not establish roots among shop floor workers. In fact there was only a small group of active members. Even though shop floor workers were sympathetic, there was little active support and, at the level of shop floor production units, managerial prerogatives and the authority of senior foremen prevailed. So when the dissident group seized control of the union, with the support of sympathetic public opinion, they found that they were surrounded by adversarial groups. Essentially the new union leaders remained minorities. Nevertheless, they tried to build a more independent and autonomous union organization in POSCO.
Management's response to the new union leadership was tough-minded. At first, when the dissenting group was elected as the new union body, the company managers were very surprised. On losing its cooperative partner the company changed its union policy. Retreating from its cooperative strategy the company began to show less tolerance. The growing confrontation between the two parties led to great tension in labour relations throughout the country. Because the power base of the militant union leadership was too weak to endure such confrontation, the adversarial tug-of-war did not last more than six months. As the tension between the two parties escalated, conservative workers began to withdraw their support for the union. A massive and abrupt exit of union membership followed, thus dramatically reducing the membership size from more than 20,000 workers to less than 100 within six months. Union members were marginalized and could not maintain their activities. After three years of activity the union was a spent force.
Institutionalization of the union free stage
The collapse of the union was accompanied by the breakdown of the communication system within the company, which therefore needed to find an alternative to a union. It began to seek to create alternative organizations. The genesis of such efforts was when senior workers proposed an "employee association". This new organizational form was planned to encompass preexisting communication channels, except unions. Some senior workers tried to organize a group to replace the union, with the informal support of the company. It began to elect new representatives by indirect voting. The first level shop floor representatives were elected by direct voting of the workers, but the official representatives were selected by the elected members. Although the members of the new organization did not claim they were replacing the union's functions, in reality, it began to take them over.Since its inception in 1992, the new organization has consulted with the company about various employee concerns. Even though it did not have the power to bargain with the company, the newly organized employee association began to perform the functions of labour-management consultation. In the spring of 1993 the association officially consulted with the company about wage problems and about the new profit sharing programme. So the movement toward the institutionalization of a non-union paradigm had begun. It is not possible to predict the future of this movement because many shop floor workers view it with suspicion. Support for a union among young and senior workers is still very strong. There also remain many sources of confrontation. In addition, it is doubtful whether the employees association could organize the autonomous voices of the shop floor. In the present situation the gap between the shop floor and the association seems to be as great as that between the shop floor and the militant union body. Many obstacles and uncertainties still await. If the employees' association is unable to survive on its own it will be very difficult to maintain its own autonomy. Seen from a broader and historical perspective, POSCO's labour relations seem to be moving toward the institutionalization of a non-union and cooperative paradigm and management is controlling the major stream of changes.
