The social consensus betrayed: Transformation of employment system in Korea since 1997 Asian financial crisis

This research emphasises the institutional nature of the labour market is defined by a range of formal and informal institutions that embody certain rights and obligations. As institutional approaches in economics argues, the labour market is characterised by about a thousand collective bargaining agreements, many of them defining only the main principles and procedures of negotiation. Employing basic line of such agreements, the market is run by a variety of motives and interactions. This view, therefore, requires that we have to bring politics explicitly into the analysis of the market. Because, all institutions, including the market (which is often assumed by mainstream economists not to be an institution) are defined in relation to the structure of the right and obligations of the relevant actors. And as the definition of those right and obligations is ultimately a political act, no institutions, including the market, can be seen as being free from politics. Thus, there must be practice, custom and history both of the labour and business (and even the state with the context of Korean developmental state) respectively and between them, which build up a set of common expectations that allows the actors to coordinate effectively with each other, and are required to be examined under political approaches. In this vein, the Korean case of institutional reform after 1997 Asian financial crisis provides critical lessons to examine the matter of how the labour market institutions shape – and are shaped by – collective action in politics and at work. This research takes as its point of departure the changes in the system (the political, economic and social changes) that took place in 1997, when a presidential election was held (leading to the transfer of power in early 1998), and the Asian financial crisis resulted in Korea availing itself of (drawing the social consensus from tripartite committee) and consenting to the conditions of the IMF’s relief loan programme. The crisis and the state (political- and bureaucrat- elites)’s resolution programmes under the IMF’s bailout generated an institutional basis for economic transformation towards greater flexible labour market so that the lay-offs system, dispatching system (the use of non-standard, temporary, or fixed-term contracts), and flexible working hours system could be implemented. However, this research assumes that the practice of labour market took an unexpected path: the more rigidity (closed/ impervious) in big business labour market and the greater flexibility (mobile/ permeable) in SME labour market. Then, the key questions of this research lie on identifying (1) how each institutions work (complementarily or contradictorily?), (2) how informal institutions (habits/ customs) of employment relations affect, (3) how the actors interact on establishing institutional sets, and (4) how the 98’s social consensus is clarified (from national politics or outer pressure?). This research was conducted by exploring official statistics of government and listening to the accounts of stakeholders’ (elite bureaucrats, political elites, business leaders and labour leaders) experiences in the field.