Abstract
The variations in the politics of labor market reform in Japan and Korea, with particular attention to employment protection, wage bargaining and industrial relations, and social protections, are the focal point of labor market reform not only in Japan and Korea but also in other industrialized countries. These variations provide critical lessons on patterns of adaption during hard times. With recent economic crises in the United States and the European Union, the cases of Japan and Korea are more relevant than ever, particularly in countries where labor market rigidities constitute important economic factors. This book is an in-depth comparative case study of Japan and Korea, and as such it enriches discussions of labor market reform by offering an analytical framework based on empirical data. In addition, it complements existing studies on institutional change and the development of capitalism by elucidating the role of the labor market. Compared with other market institutions, the labor market has been relatively under-studied with regard to theories of development. This book emphasizes the explanatory role of incorporating existing institutional arrangements of the labor market into the discussion, by demonstrating how labor market institutions set the boundaries within which reform occurs, and how they shape the political and economic calculations of key reform actors.
Chapter 1 addresses several key dimensions of the labor markets and social protection systems in Japan and Korea. The institutional similarities of the countries’ national political economies are well known, and these two countries developed similar labor market arrangements, such as strong employment protections for regular workers, decentralized wage bargaining, and small welfare states. Despite these similarities, however, Japan and Korea had different trajectories of labor market reform. Under the pressure for reform, Japan adopted labor market liberalization for outsiders while retaining a high level of employment protection for insiders, which led to increasing labor market inequality and dualism between insiders and outsiders. In contrast, Korea promoted labor market liberalization for all workers, targeting regular workers among large business conglomerates in exchange for improving workers’ right to unionize as well as protections for nonregular workers. Even so, Korea was unable to avoid increased labor market inequality and dualism, which resulted in the reinforcement of economic disparity between the workers in the conglomerates sector and the other workers in the labor market.
Chapter 2 develops a theoretical framework for explaining the politics of labor market reform in the face of challenges in national political economies. It has been argued that the institutional arrangements of the labor market determine the political dynamics of labor market reform, inequality, and dualism. Given the institutionalized practices of employment protection, which cover a large proportion of the workforce, insiders, employers, and policy makers are more likely to form a political coalition in order to promote reform for outsiders while privileging the interests of insiders and minimizing the political and economic costs of reform for insiders. In contrast, if the employment protection system is less institutionalized because it only covers a very small segment of the workforce, employers and policy makers are more likely to advance labor market reform to insure greater flexibility.
Chapter 3 elaborates the ways in which a set of labor market institutions and social protection programs were established and developed in Japan and Korea during the period of industrialization. The similarities and differences in political dynamics in the development of these institutional features affected the process and outcome of recent labor market reforms. Japan and Korea developed many similar institutional configurations of their labor markets and social protections, such as strong employment protection, decentralized industrial relations, and small welfare states; as a result, the existing literature placed these two countries in the same category. However, subtle but important differences in the process of establishing and maintaining these institutional arrangements of the labor market, represented by the different characteristics of employment protection systems and the development or underdevelopment of wage coordination mechanisms, affected the diverging political pathways of labor market reform in the two countries.
Chapter 4 describes the political processes and outcomes of Japan’s market reform over the past two decades. During this time, Japan adopted more market-oriented principles in the labor market than it had done previously, such as increasing labor market flexibility and diversifying employment and working conditions, but it did not conform to the neoliberal model of the labor market, represented by easy hiring and firing practices in response to the fluctuations of the business cycle. The institutional arrangements of employment protection systems and decentralized industrial relations affected the trajectory of Japan’s reform by shaping the incentives and strategies of employers, workers, and policy makers, which led to the formation of a political coalition supporting reform for outsiders while retaining insider-favored social protections. Institutional protections for insider interests, entrenched in these arrangements, further ensured their job security, high wages, and generous social protections. Such institutional configurations transferred the costs of labor adjustments to an increasing number of outsiders, thus exacerbating inequality and dualism in the Japanese labor market. Labor market reform responded to political and economic challenges incrementally while maintaining the key tenets of the institutional foundations of the Japanese labor market model.
Chapter 5 discusses Korea’s significant changes in the labor market over the past two decades. Authoritarian control over industrial relations and the labor market started to break down after the democratic transition, and the division of the labor market into privileged insiders and underpaid and under-protected outsiders intensified after the financial crisis. In the face of these political and economic challenges, Korean policy makers sought a new labor market model, and proposed labor market reform in order to achieve greater flexibility, stable industrial relations, and the expansion of social safety nets. In Korea, with less employment protection (which covered only a small segment of the workforce), employers and policy makers in different governments promoted comprehensive labor market reform for all workers in times of economic crisis, unlike their Japanese counterparts. Meanwhile, insiders endeavored to secure their high level of employment protection in the face of labor market reform, but had no political allies to support them. With such a small proportion of the workforce receiving employment protection, and decentralized industrial relations involving militant unions, the politics of Korean reform were turbulent and confrontational, rapidly widening the economic disparity and dualism between insiders and outsiders. Given that employment protection for insiders has been supported by the large enterprise unions, the institutional stability of employment protection for insiders may weaken, depending on changes in the strength of the unions, and this might trigger yet another round of reform and institutional change in the Korean labor market.
In Chapter 6, Song analyzes the politics of labor market reform in Japan and Korea and considers the broader theoretical and empirical implications for institutional changes in the labor market and social protection. These two countries have been identified as primary examples of coordinated market economies confronting more pressure to reform their rigid labor market institutions in an era of globalization than a liberal market economy would face. The political and economic pressure promoted a series of reforms intended to solve economic distress and intensified market competition, although each country adopted a different approach that shaped the interests and strategies of employers, workers, and policy makers.
The book provides a broad perspective on the politics of labor market reform, employment status, firm size, gender, age group, economic disparity between the workers, liberalization, and the ways in which countries deal with the pressure for labor market reform in response to global and national crises. The author realizes that structural changes (aging of society, changing composition of the workforce, and globalization) in the national political economy may cause fundamental changes in the labor market and social protections, not only in Japan and Korea, but also in other advanced industrialized countries. However, these changes may shift the institutional arrangements of the labor market themselves, and may result in new political dynamics of labor market reform in the long term. The book is highly recommended for people interested in the politics of labor market reform, and it is an invitation for future scholars and researchers to explore recent economic reform politics, and consequences and implications for national political economies. I would particularly recommend this book to readers and researchers interested in empirical methods. It is well-written, well-planned, and rich in theoretical and practical interpretation. No doubt the issues raised enrich our ideas about the politics of labor market reform in response to global and national crises.