SEOUL, Feb 1, 2019, Hankyoreh. Hyundai Motor and the Gwangju Metropolitan Council have agreed to establish a joint low-wage automobile assembly factory in Gwangju as a way to create jobs, reported the Hankyoreh.
One of the policy objectives of the South Korean government, under President Moon Jae-in, is implementing the Gwangju job creation model, which is based on a win-win relationship between labor and management. Under the Gwangju model, named after a city in the southwest of the country, wages are kept at about half the level at the major car manufacturers, with the central and local government paying “social wages” for housing and education. The Gwangju model is inspired by Auto 5,000, a project set up in the German city of Wolfsburg, the home of Volkswagen.
The rationale behind the Gwangju model is the belief that profit-driven growth has led to a widespread degeneration in the quality of jobs and that the high level of wages at automakers has driven car factories out of the country. The model is also known as a “job-oriented social alliance” based on the four-point agenda of appropriate wages, appropriate work hours, accountable management by labor and executives and improving relations between the prime contractor and subcontractors.
Above all, the Gwangju model aims at “win-win jobs.” Reduced labor costs give companies various incentives for investment, while workers can become the agents of accountable management while also getting high-quality jobs. Regional governments can resolve the shortage of local jobs while using their rights as stockholders in the company to further public interests.
The Gwangju model is one of the 100 policy objectives of the Moon administration, and Moon mentioned the model’s importance during his New Year’s address. After its initial application in the city of Gwangju and the automobile industry, the Moon administration plans to expand this win-win model into other regions and industries.
Though the Gwangju model is the product of social dialogue between labor, management and government in the region, doubt remains about whether the “ideal” (that is, this model) will actually work in reality. The biggest obstacle is the challenging conditions in the global automobile industry, in which supply is regarded as having already reached a saturation point. South Korea’s automobile industry is already undergoing restructuring, with idle capacity at domestic factories amounting to 700,000 units a year. This is the result of domestic automakers’ severe sales crunch, driven by stagnant demand over the past few years.
Despite being a sticking point in the negotiations, a five-year delay on wage and collective agreement bargaining was ultimately preserved and remains a flashpoint for controversy. Another problem is the lack of any concrete ways to improve relations between the prime contractor and subcontractors. These are hurdles that must be cleared before the Gwangju model can be extended around the country, as the government hopes.
“The major challenge is how to create the framework for social dialogue, including the ownership structure of the new company and a deliberative body for labor and the government that can find ways to ease market concerns,” said Park Myeong-jun, a senior expert member of the Economic, Social and Labor Council.
At least for now, the Gwangju region appears to be welcoming the deal for the joint venture. “We’re paying attention to the emergence of a model for creating jobs given the vulnerable condition of the economy,” said Jeong Je-won, director of Participation in Autonomous Rule 21, a civic group in Gwangju.
“This isn’t only about bringing one automotive factory to the city. It’s important to build a framework for creative management by labor and company executives,” said Eun Woo-geun, a professor at Gwangju University and the permanent president of the Association of Professors and Researchers in Gwangju and South Jeolla Province.
Organized labor community calls model “anti-labor measure”
There has been a backlash from organized labor, however. Leaders of the Hyundai Motor and Kia Motors branches of the Korean Metal Workers’ Union (KMWU) led a one-day full strike on Jan. 31 and paid a protest visit to Gwangju City Hall, where the signing ceremony was being held for the Gwangju model.
“This is an excessive and redundant investment that ignores the reality and the trends in the automobile industry and creates a factory propped up by the government that cannot become sustainable or self-sufficient. On top of that, it’s an anti-labor measure masquerading as a jobs program that attempts to pay for production through low wages and unstable employment,” the KMWU said in its public statement.
By Park Ki-yong, Seoul correspondent, and Jung Dae-ha, Gwangju correspondent