The Korea Herald


[Editorial] Polarized labor market

Flood of Hyundai Motor factory job seekers shows labor market divide

By Korea Herald

Published : March 6, 2023 - 05:30

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Hyundai Motor’s recruitment ad for 400 entry-level factory workers attracted a deluge of job seekers as soon as it launched on Thursday. The carmaker’s related web page froze due to the sudden rush of applicants. On that day alone, more than 30,000 people are said to have accessed the page. It is the first time in 10 years that the company is hiring assembly line workers. Not only are new high school graduates expected to apply, but also workers looking to change their jobs are as well .

The explosive interest in the Hyundai Motor ad seeking factory workers shows that the Korean labor market has been severely polarized into large firms versus small and medium-sized companies.

Regular employees of large companies account for 12 percent of the workers in Korea. Jobs at large companies represent a highly coveted opportunity for young people seeking such "good jobs," while small and mid-sized companies suffer from chronic labor shortages.

Working at the Hyundai Motor factory has emerged as "the king of production jobs” for Korea's young people.

The average yearly pay for Hyundai Motor employees was 96 million won ($73,789) as of 2021. In comparison, the yearly pay for average workers in Korea was about 40 million won in 2022. The starting salary of Hyundai Motor factory workers ranges from 50 million won to 60 million won annually, including bonuses.

Except for occasional overtime, they work eight hours a day, five days a week. They are seldom laid off until their legal retirement age. Even after reaching retirement age, workers are given an option to work one extra year. They can buy new Hyundai Motor cars every two years with up to a 30 percent discount, depending on their years of service.

Early this month, Hyundai Motor paid every employee 4 million won in special bonuses, regardless of job performance. But these days, such "good jobs" are rare in Korea. One problem is that the high wages and numerous employee benefits can push up the prices of Hyundai Motor cars and erode consumer benefits.

The Korean labor market has become so polarized that the wage gaps between workers at large companies and small and medium-sized companies, as well as between regular and non-regular, contract workers, have widened substantially. According to Statistics Korea, the wage levels of non-regular workers at large companies, and then of regular and non-regular workers at small and mid-sized companies, account for 64.5 percent, 57 percent and 42.7 percent, of that of regular workers at large companies, respectively. The gaps become greater if working hours, annual leave, bonuses and other employee benefits are taken into account.

Upward occupational mobility from small and medium-sized to large companies or from non-regular to regular status is low. Considering the difficulties involved in changing jobs, competition for regular jobs at large companies cannot be anything but fierce.

The gap is also great between companies that have strong labor unions and those that do not. Hard-line labor unions of large companies use their strong bargaining power to protect the vested interests of their members -- sometimes even at the expense of non-regular workers and small suppliers or subcontractors.

Furthermore, the difference in terms of union membership rates is noticeable. As of late 2020, the nationwide union membership rate was 14.2 percent. The rate for businesses hiring 300 or more workers was 49.2 percent, while that for businesses hiring fewer than 30 people was only 0.2 percent.

In the eyes of job seekers, large companies with militant labor unions cannot but become objects of envy.

The Yoon Suk Yeol administration pledged labor reforms in an attempt to solve the polarization of the labor market.

Giving incentives to win-win deals between large companies and the labor unions of small suppliers is something worth considering.

Seniority-based pay systems should be replaced with merit- or performance-based ones. It is irrational that workers' years of service alone determine wage differences, regardless of job characteristics or performance.

Wage systems biased towards protecting only regular workers of large companies at the cost of non-regular workers and suppliers must be corrected. The principle of equal pay for equal work must be observed. Urgent solutions are needed to narrow the widening wage gaps between workers at large companies and those at small and medium-sized companies.