Social Pact for Job Creation - Republic of Korea

Source: Korea Tripartitie Commission

Recently investment has decreased due to continued pattern of sluggished domestic market, which is contributing to the ongoing economic difficulty. In particular, the Korean economy's ability to create jobs has sharply fallen, while observing jobless growth.

Moreover, industrial hollowing-out has been taking place with an increasing number of manufacturers moving their production bases overseas and the employment insecurity is being exacerbated by the bipolarization of the labor market and growing youth unemployment. This, in turn, leads to the fall of domestic demand, decrease in corporate investment, and increase industrial conflicts. Mired in this vicious cycle, the Korean economy is now feared to lose its base for growth potential.

Recognizing the seriousness of the vicious cycle, the representatives of workers, employers, the government, and the public interest decided to push forward the conclusion of Social Pact for Job Creation at the plenary meeting of the Tripartite Commission on December 26, 2003. Since then in-depth discussions have been made, forming the drafting committee for the conclusion of a Social Pact for Job Creation. Such discussions have led to today's historical conclusion of the Social Pact.

The Social Pact for Job Creation is to address the pressing concern of employment insecurity, including rising youth unemployment by increasing decent jobs, and to enable women and aged workers to realize their full potential. The Pact is also aimed at supporting sustainable economic and social development where growth, employment, and distribution are in the virtuous cycle by reducing the income gaps between different working classes. The Pact also emphasizes the cooperative spirit and states the role of each economic participant.

On the basis of the common recognition that entrenchment of the tripartite cooperative system is crucial to sustainable national development, we pledge that workers, employers, and the government will closely cooperate with one another so that the spirit and contents of the Pact can be spread to the workplace all over. In the mean time, the tripartite participants will exert all their efforts to take the spirit of the social compromise an opportunity to establish a new paradigm for workers, employers, and the government in responding to the rapid changes in the industrial structure.

Article 1 The government will consistently promote and engage a Comprehensive Measure for Job Creation which encompasses economic, social, and industrial policies, considering job creation as one of the priorities of the national policies.

Article 2 Measure to facilitate corporate investment by creating business- friendly environment.

2-1 (Promoting entrepreneurship) Workers, employers and the government agree that businesses play the leading role in creating jobs and that "entrepreneurship" with frontier spirit and innovation needs to be spread to the society to create more jobs. Toward the end, workers, employers, and the government will make concerted effort to create an environment where sound business activities are justly recognized and employers are admired.

2-2 (Deregulation on business activities) With a view to easing regulations on business activities, the government will have a thorough review of all regulations that may hinder investment expansion such as starting businesses, constructing more factories, etc.

2-3 Expansion of tax and financial benefits

1. The government will explore a temporary measures to utilize tax and employment insurance to provide incentives to businesses.
2. The government will strengthen tax benefits to businesses in order to facilitate investment in creating jobs, by expanding the coverage of tax deduction for investment in research and development(R&D) and human resource development(HRD).
3. The government will increase financial assistance to foster small and medium-sized enterprises(SMEs) and venture businesses by raising the special assistance fund to lend them at low interest rates.

2-4. Improving efficiency in managing workforce

1. Workers and employers will cooperate to improve efficiency of workforce management, in order to respond actively to changes in the business environment. In case there is need for a layoff, businesses will try to minimize the number of workers dismissed by increasing functional flexibility of labor market in a business through adjustment of wages and working hours, and change of posts. The government will strongly support these efforts, utilizing the employment insurance fund.
2. Workers and employers will make concerted effort to improve the wage system reasonably. As an assistance to this, the government will establish a Support Center for Innovating Wages and Job Duties within the first half of 2004.
3. Workers, employers and the government will cooperate to improve the quality of work.

2-5 Training and supplying workers that meet the industrial demand

1. Workers and employers will recognize the importance of human resource development (HRD) for employment retention and expansion. Businesses will increase investment in human resource development. Workers will actively participate in vocational ability development. The government will strengthen its assistance to workers' voluntary participation in education and training courses and vocational ability development programs conducted by employers in consultation with workers, with a view to help workers' life-time vocational ability development.
2. With an active government assistance, workers and employers will form and operate an HRD Committee for each industry which will consist of representatives of workers, employers, education or training facilities, and research institutes, in an attempt to provide education and training tailored to each industrial demand.
3. The government will expand its assistance to vocational training projects conducted by workers' or employers' organizations and studies on labor market policies.
4. The government will help businesses hire the appropriate workers by improving the functions of public employment security organizations such as employment security centers and promoting the private employment security function such as improved information dissemination on labor market.

2-6 Assistance to SMEs in securing workers

1. The government will increase the amount of assistance to improve working environment and enable more companies to benefit from the assistance. The government will also strengthen its assistance such as a subsidy for newly established business and a subsidy for improving employment environment.
2. To help SMEs hire professionals or skilled workers, the government will grant a bounty to a business which hires professionals or skilled workers and expand the assistance to in-house training.

2.7 (Attraction of Foreign Direct Investment(FDI)) The government will step up its efforts to facilitate foreign direct investment(FDI). Administrative and financial assistance will be strengthened; living environment will be improved; and one-stop service will be provided.

2-8 (Expansion of business investment) Businesses will gradually increase investment in job creation.

1. Businesses will try as hard as they can to refrain themselves from artificial adjustment of employment. But in case employment adjustment is inevitable, Employers will minimize the number of workers dismissed through good-faith consultations with trade unions and try to reemploy the dismissed first when they hire workers later on.
2. With increased assistance from the government, workers and employers will strengthen outplacement programs to facilitate reemployment of retirees.

A. Workers and employers will exert effort to reduce working hours in line with the revised Labor Standards Act, thus eventually achieving job sharing. The government will develop measures to assist these efforts, such as subsidy for reducing working hours.

B. Workers and employers will try to achieve both the job creation and increased labor productivity by devising various measures that meet each business, including the improvement of shift working system. The government will identify some of the good measures and explore means to assist businesses to adopt such measures.

1. By supporting the business stability of their subcontractor firms with the setting of realistic contract costs and timely payment, large companies will help to improve the employment security and treatment of workers in their subcontract firms. Large companies will not transfer their own labor costs on to their subcontractors without justifiable reasons.
2. Worker and employer in large companies will actively support research and development efforts and human resource development by their suppliers or related firms. And the government will actively devise cooperation measures needed for this support.
3. A business will not unfairly discriminate against non-regular workers in terms of wages, working conditions, education, training, and welfare, and when hiring regular workers, will make efforts to give preference to their non-regular workers. A union will try to have their labor movements reflect the opinions of non-regular workers, vulnerable people and workers in SMEs as well.
4. The government will actively find ways to support non-regular workers through employment insurance in order to stabilize their employment and improve their vocational abilities. Also the government will come up with reasonable improvement measures for the non-regular workers in the public sector according to employment type, and take various measures to redress unfair discrimination between regular and non-regular workers.
5. Workers will cooperate in stabilizing wages over the next two years, especially, in areas where wages levels are relatively high, in an effort to create jobs and reduce the wage gap with non-regular workers and workers in SMEs.

1. The government will continue to keep inflation rates at around 3% and make special efforts to stabilize real estate prices and reduce private education costs.
2. The government will continuously pursue measures to reduce tax burdens on workers and devise ways to increase the incomes of low-income earners.
3. To solve housing problems for low-income families, the government will supply more than 500,000 housing units in the form of national housing rent, and provide more than 8 trillion won annually to subsidize their housing construction, purchase and rent over the next five years. The government will also devise ways to revise upwards housing benefits paid to lowest-income families in stages.

1. The government will expand the scope of eligible beneficiaries under the National Basic Livelihood Security Act in stages. And to support their self-reliance and self-support, the government will increase the number of organizations sponsoring their self-support and strengthen self-reliance work, vocational training and employment support activities for these beneficiaries.
2. To stabilize the livelihood of workers with overdue wages and reduce temporary financial burdens on companies, the government will implement measures to gradually expand the coverage of the wage claim guarantee system which currently applies only to those retiring from bankrupt companies.
3. Workers and employers will make joint efforts to remove the dead angle ground of social insurance, in which non-regular workers, workers in small workplaces, etc. are placed. Meanwhile, the government will work to simplify related application procedures, enhance publicity activities and secure the appropriate number of related workers.
4. The government will enhance the participation of workers' and employers' groups in managing and operating the social insurance system.
5. The government will improve labor inspection for vulnerable workers, for instance, by devising measures to encourage the actual participation of workers and employers in establishing labor inspection policies.

1. The government will create social service jobs especially in public interest areas, and establish the institutional foundation for developing them into a company.
2. The government will continuously create social service jobs by expanding child care services, activating patient-caring services and increasing assistant workforce in the public service sector, such as social welfare workers.
3. The government will increase the number of public-sector new recruits in areas which are suffering from labor shortages.

1. A business will make efforts to boost youth employment given the serious youth unemployment. Meanwhile, the government will provide systematic support for the career-building and employment of young people by providing opportunities for them to experience and explore jobs, increasing vocational guidance at schools, enlarging on-the-job training programs and supporting overseas training and education and overseas employment.
2. The government will promote the employment of the aged and expand support for investment in the aged's ability development by activating subsidy programs to promote the employment of the aged.
3. To ensure the continuous employment of middle and old-aged workers and boost youth employment, labor and management will make efforts to introduce a wage peak system suitable for their company's situations after close consultation and make sure that such a wage peak system should not be used as a means of simply cutting wages. The government will make systems to support this.
4. The government will increase the share of the cost burden of maternity leave benefits borne by society from the current 30 days to 60 days by 2006. The government will also make efforts to ease the burden of child birth and child care on workers by enhancing the effectiveness of the child care leave system, increasing support for the use of replacement workers during child care leave, and expanding child care services.
5. The government will take the initiative in efforts to expand the employment of the disabled by increasing the share of the disabled in newly hired public servants and expanding infrastructures for the employment of the disabled. In addition, the government will provide support for industrial accident victims to return to work and strengthen incentives for a business to hire the disabled. Workers and employers will expand the employment of the disabled by providing convenient facilities for the disabled and staging a campaign called "let's have disabled co-workers".

1. Employers will build a basis for trust between worker and employer by practicing transparent and ethical management, such as making management information available to workers and rooting out the practices of illegal political funding. Workers and trade unions will actively cooperate in innovating their workplaces and improving product quality and productivity for the mutual interest of both workers and employers.
2. Workers and employers will make joint efforts to activate information- sharing at workplace and workers' participation. On the other hand, the government will expand financial support for programs jointly conducted by workers and employers to improve their sound industrial relations.

1. Workers and employers will firmly establish the practices of autonomously and peacefully settling their disputes through dialogues and compromise within the boundary of laws.
2. Workers, employers and the government will make joint efforts to embody the spirit of employment security -- wage stability -- workers and employers harmony during wage and collective bargaining at workplaces.
3. A union will not commit an illegal acts, such as occupying production facilities and obstructing business operation, while a business will not commit unfair dismissal and unfair labor practices.
4. The government will expand the functions and infrastructures of labor relations commissions to prevent industrial disputes in advance and make mediation process more efficient and specialized.
5. The government will help industrial peace and the rule of laws and order to take hold by encouraging dialogues and compromise between workers and employers and enforcing laws fairly and strictly.

The government will organize and operate an body tentatively called "Joint Public-Private Sector Committee on Job Creation" (presided over by the prime minister) which consists of workers, employers and government representatives to continuously complement and develop this Social Pact.

Workers, employers and the government will pursue joint projects for job creation joined by various groups in each local area through local tripartite meeting to spread this social agreement at the local level.

Workers and employers will actively provide guidance to ensure that the contents of this Social Pact is sincerely reflected in the wage and collective negotiation process of an individual workplace.

Workers, employers and the government will, if necessary, pursue the signing of follow-up agreements.

Workers and employers will ask political circles for active support to promptly prepare legislation and budget necessary for the implementation of this Social Pact.

In the belief that without political stability, economic growth and job creation would be both difficult, workers and employers will request political circles to soon come up with and take measures to improve high-cost political structure, such as making political finance more transparent.

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