The "chicken game" played by major Korean conglomerate unions, which demand excessive compensation and benefits on the pretext of strong business performance, shows no signs of ending. Ahead of wage negotiations at SK hynix (000660.KS), voices within the union are growing louder to raise the in-house loan ceiling — currently up to 100 million won per employee at an annual interest rate of 1.5% — to as much as 500 million won at an interest rate of 1.5% or lower. The move came after the Samsung Electronics (005930.KS) union reached an agreement with management to establish a new "housing stability loan" providing up to 500 million won per employee, prompting the SK hynix union to follow suit in what looks like a competitive race.
In the steel industry, the POSCO union submitted a demand last month for a 7.1% increase in base pay, despite a severe downturn. The Hyundai Steel union is demanding a 150% increase in performance bonuses. The Kakao union, after its demand for 13-14% of operating profit as performance bonuses was rejected, decided to stage a partial strike on the 10th of this month. The unions of Hyundai Motor (005380.KS) and HD Hyundai Heavy Industries are pressuring management for performance bonuses equivalent to 30% of operating profit.
While Korean companies are held back by their unions, overseas competitors are focusing on productivity gains and investment expansion. According to the Korea Enterprises Federation, Japan's Toyota union expressed its commitment to improving work efficiency for productivity gains and cost reduction in four labor-management council meetings this year. ChangXin Memory Technologies (CXMT), at the forefront of China's semiconductor push, is preparing for an initial public offering (IPO). Yet Employment and Labor Minister Kim Young-hoon is leisurely calling for public discussion on the distribution of excess profits at large corporations. It is an inappropriate idea that could dampen corporate reinvestment in technology and facilities.
Excessive wage and welfare demands by mega-unions could further deepen the structural vulnerabilities of the Korean economy. The reckless expansion of in-house lending threatens to further stoke already unstable housing prices in the Seoul metropolitan area. If astronomical performance bonuses trigger inflation, it could lead to weakened domestic consumption, reduced export competitiveness, and economic polarization. The fallout will inevitably boomerang back as job insecurity for workers and a decline in real disposable income. Mega-unions must not invite mutual destruction by surrendering to short-term greed, and should instead contribute to sustainable economic growth. The government must rein in the unchecked actions of organized labor through balanced policy.
