In restructuring corporations and financial institutions, the large-scale layoff of redundant workers was inevitable. However, militant labor unions had traditionally been afixture in these organizations and great difficulty was expected in implementing the necessary reform. To build public consensus on the reforms, the government set up the Tripartite Commission in January 1998, which consisted of representatives from government, employer groups and the two national labor federations.
The key issue was legalizing layoffs for managerial reasons. The Tripartite Commission arrived at an agreement and relevant laws were revised in February 1998. Employers could now layoff workers in case of “urgent managerial need,” including M&As. Restrictions on the use of temporary dispatched workers were also reduced. Workers, on the other hand, made gains on such issues as legalizing civil servants’ workplace associations (a weaker form of labor unions) and teachers’unions, and allowing the political participation of labor unions, which the unions had demanded consistently since the early 1990s.
The reform, however, did not contribute much to enhancing labor market flexibility because layoffs and the use of dispatched workers were already quite common in most workplaces. But the reform had political significance in ending nationwide disputes that erupted at the turn of 1997 concerning layoffs and other industrial relations issues. Furthermore, most of the basic rights of workers were restored with the reform. Excessive restrictions on collective dismissal were now mostly dismantled. 1)
Source : SaKong, Il and Koh, Youngsun, 2010. The Korean Economy Six Decades of Growth and Development. Seoul: Korea Development Institute.
1) But excessive restrictions on individual dismissals－e.g., prohibition of long-term employment of non-regular workers－remain and need to be addressed in the future.