How Institutions Matter: Analysis of Restructuring the Employment System in South Korea

The purpose of this study is to examine the transformation of the Korean employment system since 1980. The common themes in the study of the comparative political economy of capitalist states deal with the restructuring of the democratic nation-state, the liberalisation of national economies, and the concurrent globalisation of markets and of the political institutions that regulate them. To address these issues, this study explores, on the one hand, the overhauling of Korea’s labour laws in the direction of greater labour flexibility, the changes in collective labour relations, and the policy innovations on labour protection, and on the other, the transformation in Korea’s traditional rule-making process to include both the government and social groups, the restructuring of industrial relations (particularly as regards changes to the supply chain structure), and the embedded role of the state and labour practices in workplaces. Between 1997 and 1999, the trajectory of the Korean employment system experienced a critical juncture. The study therefore investigates the major labour policy reforms in this period in order to explain the transformation of the employment system and to situate the institutional outcomes within a formal conceptual setting, thereby contributing to the debate on the transformation of the Korean developmental welfare state. In so doing, this study argues that the Korean developmental welfare state has remodelled itself with the tradition of state intervention and investment, which has followed a self-reinforcing path in the employment system. Over the past two decades, the state’s interventionism in conjunction with the shifting role and responsibilities of elite bureaucrats on the one hand, and the developmental principle of policy reform involving a catching-up strategy for welfare development, on the other hand, appear as major factors in the Korean developmental welfare state’s transformation. It should be noted that labour had little impact on this development due to the fact that corporatism had not been embedded in Korean society to any great degree. With the result, although the institutional arrangements for worker protection in the labour market are characteristic of a flexicurity model – where workers are compensated, trained, and motivated to become re-employed in a highly mobile labour market, the model might appear to be in its infancy and to be in the path of reinforcing the labour market dualism and inequality.