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Inequality in the Workplace : Labor Market Reform in Japan and Korea / Jiyeoun Song

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Inequality in the Workplace : Labor Market Reform in Japan and Korea / Jiyeoun Song INEQUALITY IN THE WORKPLACE INEQUALITY IN THE WORKPLACE Labor Market Reform in Japan and Korea Jiyeoun Song CORNELL UNIVERSITY PRESS ITHACA AND LONDON Copyright © 2014 by Cornell University All rights reserved. Except for brief quotations in a review, this book, or parts thereof, must not be reproduced in any form without permission in writing from the publisher. For information, address Cornell University Press, Sage House, 512 East State Street, Ithaca, New York 14850. First published 2014 by Cornell University Press Printed in the United States of America Library of Congress Cataloging-in-Publication Data Song, Jiyeoun, 1975– author. Inequality in the workplace : labor market reform in Japan and Korea / Jiyeoun Song. pages cm Includes bibliographical references and index. ISBN 978-0-8014-5215-4 (cloth : alk. paper) 1. Labor market–Japan. 2. Labor market–Korea (South) 3. Manpower policy–Japan. 4. Manpower policy–Korea (South) I. Title. HD5827.A6S655 2014 331.120952—dc23 2013035320 Cornell University Press strives to use environmentally responsible suppliers and materials to the fullest extent possible in the publishing of its books. Such materials include vegetable-based, low-VOC inks and acid-free papers that are recycled, totally chlorine-free, or partly composed of nonwood fibers. For further information, visit our website at www.cornellpress.cornell.edu. Cloth printing 10 9 8 7 6 5 4 3 2 1 To my parents, Deungil Song and Soonnam Hwang Contents List of Tables and Figures ix Acknowledgments xi Acronyms, Abbreviations, and Terms xv Introduction 1 1. Japanese and Korean Labor Markets and Social Protections in Comparative Perspective 19 2. The Politics of Labor Market Reform in Hard Times 46 3. The Institutional Origins of the Labor Market and Social Protections in Japan and Korea 67 4. Japan: Liberalization for Outsiders, Protection for Insiders 84 5. Korea: Liberalization for All, Except for Chaebo˘l Workers 119 Conclusion 162 Notes 179 References 201 Index 223 Tables and Figures T ables I.1 Variations in labor market reform 5 1.1 Employment protection regimes for regular workers in Japan and Korea, summary scores by three main areas 25 1.2 Major legislative changes in the Japanese and Korean labor markets, 1986–2011 27 1.3 Wage-setting institutions 35 1.4 Union organization rates and collective bargaining coverage 38 1.5 Public spending on labor market programs and social protections 40 1.6 Non-statutory social welfare spending by private sectors (% of GDP) 42 1.7 Coverage of social welfare programs in Japan and Korea, 2005 43 2.1 Theory of labor market reform, inequality, and dualism 54 4.1 Percentage of Japanese firms implementing early retirement program 95 4.2 Japan’s labor market and social protection reform since the mid-1980s 99 5.1 Korea’s labor market and social protection reform since the late 1980s 131 Figures I.1 Economic growth rates in Japan and Korea (real GDP growth rates) 12 1.1 Employment protection regimes for regular workers 22 1.2 Employment protection regimes for temporary workers 23 1.3 Proportion of the non-regular workforce in Japan and Korea 30 1.4 Changes in the workforce in the Japanese and Korean labor markets 32 ix x TABLES AND FIGURES 1.5 Gaps in enterprise tenure by firm size in Japan and Korea, 1981–2007 33 1.6 Wage differentials across firm size in Japan and Korea, 1981–2007 37 1.7 Seniority-based wage curve in the Japanese and Korean labor markets 39 2.1 Proportion of the regular workforce in Japan and Korea 58 2.2 OECD EPL Index for regular employment and average enterprise tenure years 59 2.3 Average enterprise tenure years in the Japanese and Korean labor markets, 1981–2007 60 2.4 Average enterprise tenure years for Japanese and Korean male workers by age group 62 3.1 Number of labor disputes in Japan, 1970–2003 71 3.2 Labor ministers in Korea, 1961–2007 76 4.1 Share of stable shareholdings and cross shareholdings in the Japanese stock market, 1987–2003 86 5.1 Numbers of labor disputes and workdays lost in Korea, 1986–2007 124 5.2 Unit labor cost in Japan and Korea manufacturing, 1970–2009 125 Acknowledgments This book could not have been completed without the support of numerous individuals and institutions. I am deeply indebted to several scholars in the Department of Government at Harvard University, Torben Iversen, Susan J. Pharr, Jorge I. Domínguez, and Margarita Estévez-Abe, all of whom have pro- vided intellectual guidance and moral support over the years. Torben provided me great intellectual stimulation and critical advice for this project from the beginning, and he never lost confidence in me even when I was questioning myself. His constructive comments and challenging questions on earlier drafts pushed me to sharpen my analytical framework, tighten empirical presentation, and develop more generalizable arguments. Susan offered invaluable feedback and encouragement on the project. Her sharp questions led me to consider the big picture and to develop more succinct but powerful claims. Her insights and knowledge of Asian politics, particularly Japanese politics, contributed to solid foundations. Jorge was extremely generous in reading numerous manuscript ver- sions and giving me incisive comments. Jorge’s office door was always open, from day one, when I arrived at Harvard in the summer of 2001. His strategic advice and unwavering support kept me strong. Margarita (now at Syracuse University) was also very generous in sharing her time when I needed to discuss ideas and arguments. Margarita’s in-depth knowledge and understanding of labor markets, social protections, and Japanese politics helped me to shape the project. She also offered me a rewarding opportunity to work as a teaching fellow for her classes, which was the start of my career as a teacher. I owe all of these advisors a great debt of gratitude. I hope to follow in their footsteps to become a great scholar, good teacher, and generous mentor in the future. I am also very grateful to Professor Byung-Kook Kim, my undergraduate advi- sor at Korea University, who guided me to this great profession. He has always been supportive of my work and helped to open many doors for me. Professors Andrew D. Gordon and Mary C. Brinton at Harvard University helped me to enhance my knowledge and understanding of Japanese industrial relations and the labor market. I owe special thanks to Steph Haggard, Henry Laurence, and Kathy Thelen, who generously participated in an author’s conference organized and funded by the Program on US-Japan Relations at Harvard University. They read an early manuscript and gave me invaluable comments and suggestions. Steph was extremely helpful at various stages and invited me xi xii ACKNOWLEDGMENTS to the Workshop on Social Policy and Labor Markets in Korea at the School of International Relations and Pacific Studies, University of California, San Diego, to present my work and receive feedback from other workshop participants. I appreciate his time and help. I also have many friends and colleagues to thank. At Harvard, I was fortu- nate to have a wonderful group of friends. I thank Daniel Aldrich, Lucy Barnes, Shameem Black, Amy Catalinac, Magnus Feldmann, Daniel Ho, Rieko Kage, Andy Kennedy, Wendy Pearlman, Alison Post, Yongwook Ryu, Gergana Yankova- Dimova, and Jong-Sung You for their advice, help, and comradeship. I am also grateful to participants in the Comparative Politics Workshop, the Political Econ- omy Workshop, and the Contemporary Japanese Politics Study Group for valu- able feedback. I am very glad to have the chance to express my thanks to my Korean friends at Harvard with whom I went through good and bad times: Sei Jeong Chin, Youngjeen Cho, Hunsang Chun, Jeomsik Hwang, Soo-yeon Jeong, Hakyung Jung, Jee Young Kim, Sang-Hyun Kim, Suhan Kim, Ji-eun Lee, Eunmi Mun, Seongmun Nam, Wonmok Shim, Jiwuh Song, Joo-Hyun Song, Hayan Yoon, and Hyung-Kon Yum. I owe special thanks to Geunwook Lee for his advice, help, and friendship over the years. Geunwook has preceded me in every step, from graduate study to job searches and publication, and he has always been a source of advice. Finally, I thank my good old friends from college who have shared with me the joys and sufferings of writing, searching for jobs, and settling into the pro- fession as political scientists: Jin Seok Bae, Jai Kwan Jung, Engsoo Kim, Joo-Youn Jung, Heonjoo Jung, Woochang Kang, Suhyun Lee, and Hyunji Lee. In particular, Jung Kim has generously provided me with practical and strategic advice and shared his wisdom with me whenever I faced challenges. My friends outside of academia treated me to delicious food and drinks, and helped me keep a sense of humor. Most of all, they taught me that there is a life beyond graduate school. The Department of International and Area Studies and the Department of Political Science at the University of Oklahoma, where I have been a member of the faculty since 2009, provided a wonderful environment in which to concen- trate on revisions. The very final stage of revision was completed in the Graduate School of International Studies at Sogang University. I appreciate institutional support from Sogang University. I also thank Lesley Goodman for her edito- rial help in preparing the manuscript. She helped me make this book far more readable. Many institutions have provided me with financial and research support for this project. First of all, I thank the Korean Foundation for Advanced Study for funding my study at Harvard during the period of 2001–2006. At Harvard I bene- fited from generous financial and research support from the Edwin O.
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