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The internal labor market and flexibilization in Korea: Discomplementarities between institutions and firm-level bargaining system

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The Korean Labor market is characterized by both the narrow boundary of the internal labor market and the rapid flexibilization which increases unstable forms of employment such as a temporary job or a part-time job; accordingly, the segmentation of the labor market has been exacerbated and the discrimination against the temporary/ part-time labor has been structuralized and consolidated. What explains this rapid growth of the non-regular jobs that has become a specific feature of Korea? And how can the narrow internal labor market consisting of a few large companies’ permanent workers have been maintained regardless of the flexibilization of the labor market?
As many scholars theoretically and empirically have shown the continuity of ‘varieties of capitalism’, the type of labor market flexibility chosen by each country can be different according to the product market strategy one country is holding. In this perspective, most of scholars classify Korea into coordinated market economies (CMEs) similar to Japan. Korea and Japan are differentiated from western European countries and categorized into ‘group-based CMEs’, as the coordination of the former occurs at the firm level (Japanese ‘Keiretsu’ and Korean ‘Chebul’). Japan is regarded as a typical country based on firm-specific skills. This production regime induces the ‘internal labor market’ as a unique social protection mechanism in order to provide risk-averse and rational workers with the incentives to invest in their skill formation. Korean labor market is also considered organizing the internal labor market within the firm boundary of large business groups (Chebul), of which industrial relation is characterized by the strict seniority rules of income, the corporate ladder, and the life-time employment.
However, the types of flexibility pursued by each of the two countries are not identical. That is because Korean production regime is not identical to the Japanese one. As Korean firms’ product market strategy has been a Fordist mass production like the US, there are neither needs to invest in firm- or industry-specific skills nor incentives to shape the internal labor market. Therefore, the formation of the internal labor market in Korea is not explained only by the economic factors such as the production regime and the product market strategy. We should take account of the labor market institution- the firm-level bargaining system. In other words, Korean internal labor market was strengthened by militant struggles carried out by the firm-level unions, which erupted in 1987 democratization. The low-level of centralization within the labor organization caused the militant labor movements to be directed toward the formation of internal labor market, which is characterized by the income increase, employment protection, and corporate welfare services for large firms’ permanent workers.
After all, the internal labor market in Korea formed through this path could not overcome its narrowness because of the institutional discomplementarities with the production regime. With the external pressures to flexibilize the labor market, the numerical flexibility and the non-regular jobs were the chosen measure; thus, the segmentation between the large firms’ permanent workers and the unstable nonstandard workers has been exacerbated and the dual labor market in Korea structuralized.

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labor (151), market (120), firm (71), worker (55), intern (54), product (49), skill (42), korean (40), employ (34), industri (33), korea (28), level (26), flexibl (26), union (23), strategi (23), system (22), larg (22), non (21), institut (20), regim (20), regular (19),
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Name: International Studies Association Annual Conference "Global Governance: Political Authority in Transition"
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MLA Citation:

Shin, Hae Hyun. and Im, Hyug Baeg. "The internal labor market and flexibilization in Korea: Discomplementarities between institutions and firm-level bargaining system" Paper presented at the annual meeting of the International Studies Association Annual Conference "Global Governance: Political Authority in Transition", Le Centre Sheraton Montreal Hotel, MONTREAL, QUEBEC, CANADA, Mar 16, 2011 <Not Available>. 2014-11-26 <http://citation.allacademic.com/meta/p499918_index.html>

APA Citation:

Shin, H. and Im, H. , 2011-03-16 "The internal labor market and flexibilization in Korea: Discomplementarities between institutions and firm-level bargaining system" Paper presented at the annual meeting of the International Studies Association Annual Conference "Global Governance: Political Authority in Transition", Le Centre Sheraton Montreal Hotel, MONTREAL, QUEBEC, CANADA Online <PDF>. 2014-11-26 from http://citation.allacademic.com/meta/p499918_index.html

Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: The Korean Labor market is characterized by both the narrow boundary of the internal labor market and the rapid flexibilization which increases unstable forms of employment such as a temporary job or a part-time job; accordingly, the segmentation of the labor market has been exacerbated and the discrimination against the temporary/ part-time labor has been structuralized and consolidated. What explains this rapid growth of the non-regular jobs that has become a specific feature of Korea? And how can the narrow internal labor market consisting of a few large companies’ permanent workers have been maintained regardless of the flexibilization of the labor market?
As many scholars theoretically and empirically have shown the continuity of ‘varieties of capitalism’, the type of labor market flexibility chosen by each country can be different according to the product market strategy one country is holding. In this perspective, most of scholars classify Korea into coordinated market economies (CMEs) similar to Japan. Korea and Japan are differentiated from western European countries and categorized into ‘group-based CMEs’, as the coordination of the former occurs at the firm level (Japanese ‘Keiretsu’ and Korean ‘Chebul’). Japan is regarded as a typical country based on firm-specific skills. This production regime induces the ‘internal labor market’ as a unique social protection mechanism in order to provide risk-averse and rational workers with the incentives to invest in their skill formation. Korean labor market is also considered organizing the internal labor market within the firm boundary of large business groups (Chebul), of which industrial relation is characterized by the strict seniority rules of income, the corporate ladder, and the life-time employment.
However, the types of flexibility pursued by each of the two countries are not identical. That is because Korean production regime is not identical to the Japanese one. As Korean firms’ product market strategy has been a Fordist mass production like the US, there are neither needs to invest in firm- or industry-specific skills nor incentives to shape the internal labor market. Therefore, the formation of the internal labor market in Korea is not explained only by the economic factors such as the production regime and the product market strategy. We should take account of the labor market institution- the firm-level bargaining system. In other words, Korean internal labor market was strengthened by militant struggles carried out by the firm-level unions, which erupted in 1987 democratization. The low-level of centralization within the labor organization caused the militant labor movements to be directed toward the formation of internal labor market, which is characterized by the income increase, employment protection, and corporate welfare services for large firms’ permanent workers.
After all, the internal labor market in Korea formed through this path could not overcome its narrowness because of the institutional discomplementarities with the production regime. With the external pressures to flexibilize the labor market, the numerical flexibility and the non-regular jobs were the chosen measure; thus, the segmentation between the large firms’ permanent workers and the unstable nonstandard workers has been exacerbated and the dual labor market in Korea structuralized.


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