The effects of trade unions on total compensation in Korea for 1987--1999

The purpose of this study is to examine the effects of trade unions on total compensation including wages and benefits in Korea for the period 1987–1999. In 1987, free collective bargaining between employers and unions began, following political democratization and massive labor unrest. The experiences of Western countries indicate that trade unions are likely to undertake converging roles regarding total compensation. Therefore, in order to determine whether Korean trade unions undertook similar roles for the period, four specific areas must be considered: the union wage effect, the union wage-equalizing effect, the union effect on human capital and other wage determinants, and the union benefit effect.; For the purpose, this study is based on three kinds of data, individual-level data from the Basic Survey on Wage Structure for the union wage effect and union effect on human capital and other wage determinants, establishment-level data, constructed from the BSWS, for the union wage-equalizing effect, and establishment-level data from Enterprise Labor Cost Survey in Korea. The Ordinary Least Square, Quantile Regression, and Two-Stage Least Squares estimation method are used to analyze the data.; Regarding the union wage effect, results show that positive wage effects are found in Korea for 1987–1999 and the size of the union wage effect is around 5%, implying relatively low to 10–25% in the United States. While the union wage effect is larger for the lower end in the wage distribution for 1987–1995, in addition, the union wage effect for less-paid workers became less, compared to better-paid workers, from 1996–1999. The change indicates that Korean trade unions move from the organizations for less-skilled workers in the late-1980s and early-1990s to the organizations representing mainly more-skilled workers, who receive higher wages, in the late-1990s. With respect to the union wage-equalizing effect, the results indicate that unions reduced the degree of wage inequality within establishments by 7%–25% in the 1990s, when measured by variance of logarithm of wages and by 7%–14%, when measured by standard deviation of logarithm of wages. The result implies that Korean unions have succeeded in preventing their employers from introducing pay-for-performance wage systems in the 1990s. Also, it is shown that the union reduces the return for education and tenure in all years and gender wage differentials in most years studied. Regarding union benefit effect, results imply that unions increase the level of voluntary benefits, compared to non-organized establishments. In addition, the union organizing rate within establishments and the individual union's affiliation to the national union confederation are shown to affect the level of benefits and nature of benefits, provided by employers.