Unions, government, and the politics of industrial relations in Korea: Union bargaining power and labor control policy from democratization to post-IMF intervention

Skepticism toward unions is widespread today; unions are in big trouble in contemporary industrial societies as union density declines. Korea does not seem an exception. Prior research in Korea argued that Korean unionism was in crisis during the 1990s due to the authoritarian labor controls of the government as well as economic transformation towards neo-liberalism. Little is known about the empirical causality between the decline in unionism and governmental labor controls, however. This study empirically examines the changes in union bargaining power from the period of democratization to the IMF-intervention in association with labor control politics and macro economic conditions in Korea. Union bargaining power is measured by union wage effect using both an aggregate panel analysis and micro data analysis. Both approaches allow for simultaneity and heterogeneity bias through applying a sophisticated empirical method.; New evidence of the union/nonunion wage differential counters the prevailing view of unionism-in-crisis. The aggregate panel analysis with logistic transformation shows the positive effects of unionization on real wages during the whole period. The micro data analysis with correction for selection bias reports different outcomes from the prior studies that used a cross-sectional analysis with conventional OLS method. The estimated individual union wage effect is 24, 18, 19, and 21 percent, in liberalization, authoritarian repression, market-oriented controls, and neo-liberalism, respectively. The empirical outcomes imply that Korean unions retained strong bargaining power throughout the 1990s, countering the conventional view that the unions are in crisis. While the effects of the varied labor control strategies on union bargaining power differ, the Korean unions had a somewhat better pay off under authoritarian state-corporatist controls than under market-oriented controls. In addition, due to the existence of strong unionism, the recent economic crisis deepened dualism in the Korean labor market, increasing income inequality between the union and nonunion sectors. Strong unionism is associated with the transformation of the Korean industrial relations system in the future; it implies that the Korean industrial relations system is more likely to shift towards a neo-corporatist model in which both labor and employers get a better pay off.